Tencent and Dragoneer participated in the investment, which will help Farfetch further grow its digital luxury fashion marketplace.
“Tencent’s deep technology expertise and ongoing relationship with Farfetch, paired with Dragoneer’s expertise in supporting growth-oriented technology companies, makes both investors outstanding partners to support Farfetch’s next chapter of growth,” José Neves, founder, CEO and co-chair, said.
“As we continue to execute on our long-term strategy,” he added, “we believe that this investment supports Farfetch in delivering on the significant opportunity we see and scaling our business to achieve profitability in the medium term.”
Farfetch said its cash and cash equivalents totaled about $320 million as of Dec. 31, and the additional raise would supplement its current liquidity position.
Farfetch is considered to be among the premier luxury gateways to China, enabling western luxury brands to reach the Chinese consumer through Tencent’s WeChat platform. More than 80 luxury brands are active on Tencent’s WeChat, including Moncler, Armani, Ralph Lauren, Saint Laurent and Balenciaga.
“We are excited to build on our cooperation with Farfetch and support the company as it accelerates its growth in China and enhances its customer experience and offerings in the region. Tencent looks forward to supporting Farfetch’s mission to be a global technology platform for luxury fashion, and especially where we can support its efforts in China,” Martin Lau, president of Tencent, said.
San Francisco-based, growth-oriented investment firm Dragoneer, which has invested in startups like Airbnb, Dollar Shave Club, Etsy and Flipkart, manages more than $8.5 billion in capital for endowments, sovereign wealthy funds and family offices.
“Under José’s 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,” Marc Stad, Dragoneer’s founder and managing partner, said. “We look forward to the company’s continued execution of its strategic vision to take the business to the next level.”
Farfetch over the past few years has focused on building out its luxury platform. Recent deals include a $675 million August purchase of New Guards Group–which is also the exclusive licensee for streetwear innovator Off-White–and the $250 million purchase of streetwear group Stadium Goods in December 2018.
Last month, Farfetch-owned New Guards acquired Opening Ceremony for an undisclosed amount. Opening Ceremony founders Humberto Leon and Carol Lim will remain as co-creative directors, but the stores are in the process of being shut down.
Farfetch has said its aim is to leverage expert design capabilities to build the brands of the future. The luxury platform defines those brands as labels that can leverage digital channels to engage a global community, offer best-in-class design and manufacturing, and execute direct-to-consumer global online distribution complemented by a wholesale presence in select brick-and-mortar boutiques.
Farfetch completed its initial public offering in September 2018, raising $885 million.
The structure of the raise is through a private placement where Farfetch issued convertible senior notes having an aggregate total of $250 million. Global technology firm Tencent, based in Shenzhen, China, agreed to purchase $125 million of the notes., with Dragoneer purchasing the remainder. The investment furthers Tencent’s ongoing relationship with Farfetch.
Closing of the transaction is subject to customer conditions. The notes are set to mature on Dec. 31, 2025–unless converted, redeemed or repurchased under certain conditions–and bear interest at a rate of 5 percent per year, payable quarterly beginning on March 31.
The notes are considered senior, unsecured obligations of Farfetch.