What happened

Shares of Farfetch Limited (NYSE:FTCH), a global luxury digital marketplace connecting consumers and luxury sellers, are soaring over 14% Thursday morning after the company announced it raised $250 million total from Tencent Holdings (OTC:TCEHY) and Dragoneer Investment Group to support its growth initiatives.

So what

Dragoneer, a San Francisco investment firm, and Tencent, a leading Chinese technology company, both committed to purchase $125 million of Farfetch's issued notes. The financing will immediately bolster Farfetch's liquidity position: Its cash and cash equivalents as of Dec. 31, 2019 were roughly $320 million. In a press release, Dragoneer Founder and Managing Partner Marc Stad said:

We are delighted to have the opportunity to invest in Farfetch at this stage in the Company's growth story. Under José [Neves]' leadership, Farfetch has established itself as the leading global technology platform for luxury fashion, capturing market share and delivering a unique service to its growing customer base and its community of brands and boutiques. We look forward to the Company's continued execution on its strategic vision to take the business to the next level.

Woman wearing fashion apparel

Image source: Getty Images.

Now what

This is positive news for Farfetch's investor base hoping the company is prepared to kick off its next chapter of growth that will continue into its long-term strategy of delivering profitability. The financing should enable the company to ramp up its growth in China -- especially with a stronger partnership with Tencent -- and build out its consumer offerings through its platform. If the company can continue to gain traction, the long-term prospects are tantalizing, even in a competitive industry, as e-commerce continues to expand and online penetration for luxury goods is rather low at around 12% according to Credit Suisse, which has an Outperform rating on Farfetch and a $17 price target.

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