Farfetch (FTCH +0.00%) stock is cratering in Wednesday's trading. The e-commerce specialist's share price was down 47.6% as of 10:15 a.m. ET, according to data from S&P Global Market Intelligence.
Farfetch announced after the market closed yesterday that it would be delaying the publication of its third-quarter results. In addition to the earnings delay, new reports cast doubt on the possibility that the company would be taken private. The potential for a go-private deal had previously caused a spike for the company's valuation, but subsequent reporting seems to have at least temporarily taken the air out of that balloon.
With new cause for uncertainty now injected into an already embattled stock, investors are rapidly selling out of the company's stock.
OTC: FTCH
Key Data Points
Farfetch shocked investors with its Q3 delay
In a press release published after Tuesday's market close, Farfetch announced that the earnings release and conference call that it had previously scheduled for today would no longer take place. The company also announced that it was withdrawing all previous guidance that it had issued. The luxury e-commerce specialist also said that it would not be issuing new guidance at this time, but that it planned to provide a business update "in due course."
While earnings reports can be delayed for a variety of reasons, it's rarely good news. Perhaps even more strikingly, Farfetch didn't announce the delay until a day before the Q3 results were scheduled to be published.
Delaying earnings releases is a rare move for publicly traded companies, and it's even more shocking to see a delay announced so soon before results were scheduled to be published. It's also not a good signal to send to potential investors if a company is orchestrating a plan to go private.
Farfetch has also seemingly been on track to pursue a bigger partnership with Richemont and acquire a 47.5% stake in its YOOX Net-a-Porter online fashion business, but that now appears to be in jeopardy. For its part, Richemont management recently said that it has no plans or intentions to invest in Farfetch.
What does the big delay mean for Farfetch?
In addition to being announced seemingly out of nowhere, the press release for the delayed release of Farfetch's Q3 is notable because it provides virtually no insight into the reason why the report has been postponed. Typically, companies would offer some context for why a crucial piece of financial reporting did not arrive as planned.
With such a sudden and sparse announcement that the company's third-quarter results won't be published as planned, it's little wonder that investors are feeling extra bearish about a company that already had a speculative outlook. A speculative situation has become even more speculative, and there's seemingly not much cause for positivity based on recent business performance and the nature in which the news was delivered.
Based on previous instances in which earnings reports have been unexpectedly delayed, it's possible that Farfetch may have found significant flaws with its accounting practices. If so, the company may have seen the need to recalculate results for Q3 and previous quarters. Alternatively, it's possible that the company saw publishing Q3 results right now as a hindrance to continuing to trade on a major exchange in the short term or setting up a go-private deal.
The exact cause for the reporting delay remains to be seen, but it's not surprising that the market is reading the postponement and reported reversals about possibly going private as a potentially disastrous omen.
