What happened

Shares of Coty (NYSE:COTY) were taking a dive today after Forbes removed Kylie Jenner from its list of billionaires and alleged that Jenner inflated the sales volumes of her company, Kylie Cosmetics. Coty paid $600 million for a 51% stake in Kyle Cosmetics last November.

As a result, Coty stock was down 10.4% as of 2:32 p.m. EDT.

A woman putting on makeup in the mirror

Image source: Getty Images.

So what

The Forbes article portrays the Kardashian-Jenner family as desperate to appear wealthier than they are, and alleges they inflated the sales of Kylie Cosmetics to get the youngest Jenner to appear on Forbes' billionaires list. Among the fraudulent claims Forbes alleges is that the Jenners said 2018 sales from Kylie Cosmetics were $360 million when they were really only $125 million.  

It seems that Coty was aware of what the real sales were at the time, but analysts and the investing public had heard and believed the numbers that had been widely reported in the media earlier. Even based on those numbers, a number of analysts thought that Coty was overpaying for the company, and questioned whether Kylie was a fad.  

Now what

The revelations from Forbes come during a busy week for Coty as the company appears to be an acquisition target. Rumors are circulating that Henkel may acquire it, though the parties have been in talks for several months.  

Though the news about Kylie Cosmetics may have already been known, it still looks like another stumbling block for Coty after the company's deal to buy Cover Girl and 42 other brands from Procter & Gamble in 2016 turned into a bust and has saddled it with debt. Coty has been in the process of a turnaround, but the pandemic has dampened its prospects as first-quarter results showed organic sales declining 20% and the foreseeable future is bound to be challenging as well. 

Given the Forbes reports, questions are likely to swirl about the Kylie acquisition, weighing on an already sinking stock.