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Court rules Adidas did not mislead investors over Ye collaboration
A San Francisco appeals court has rejected claims that Adidas concealed risks tied to its partnership with rapper Kanye West, known professionally as Ye, before ending the collaboration in 2022.
Background of the dispute
Shareholders accused Adidas of withholding information about Ye's controversial conduct, alleging the company knew of his behavior for years but failed to disclose potential risks in financial reports. The lawsuit argued that investors suffered losses when Adidas' stock plummeted after severing ties with Ye.
Court's reasoning
The 9th U.S. Circuit Court of Appeals upheld a lower court's dismissal of the case, stating that investors should have recognized the inherent risks of partnering with a high-profile celebrity like Ye. The ruling noted that such collaborations carry the potential for reputational damage due to unpredictable behavior.
Ye's conduct and fallout
Ye faced widespread criticism after making anti-Semitic remarks and promoting conspiracy theories. His actions, including wearing a "White Lives Matter" T-shirt at a 2022 fashion show and posting offensive comments online, led Adidas to terminate the partnership. Other companies, including Gap and JP Morgan, also cut ties with the rapper.
Financial impact on Adidas
The Yeezy collaboration had been one of Adidas' most profitable ventures, generating approximately €1.5 billion ($1.17 billion) in sales in 2021. The breakup left Adidas with over €1 billion worth of unsold Yeezy inventory. In 2023, the company announced plans to sell the remaining stock and donate a portion of proceeds to organizations combating hate.
Legal next steps
The plaintiffs, represented by HLSA-ILA Funds, had argued that Adidas internally acknowledged Ye's behavior but downplayed the risks to shareholders. The appeals court's decision effectively ends the lawsuit, though Adidas has not yet commented on the ruling. Ye was not a party to the legal proceedings.
