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Farfetch: Bigger Play in China Ahead?

Shares of luxury marketplace Farfetch Ltd. have steadily risen over the last two days following reports of investment interest from Alibaba.

The company’s stock closed at $28.13 on Friday in trading on the Big Board, and then began its climb to the $33.00-a-share range over the past two days. Rumblings that Alibaba was looking at taking a stake in the online premium fashion marketplace sparked the initial rise on Monday, and news that Eurazeo said it had exited its stake in the company sent prices even higher.

A global investment firm with 18.5 billion euros ($21.68 billion) in assets under management, and Eurazeo had Farfetch in its growth portfolio. On Tuesday, the investment firm said it has divested its stake, netting proceeds of 90.4 million euros ($105.9 million), giving it a 38 percent profitability rate, or what is referred to as an internal rate of return.

“Eurazeo Growth is especially proud to have supported Farfetch in its development strategy since 2016. We wish José Neves and his teams every success with their future growth plans,” Yann du Rusquec, a partner at Eurazeo Growth, said, referring to the Farfetch CEO and co-chair.

The private equity firm said it helped the fashion platform grow its business among luxury goods brands and expand its geographic footprint in China and other countries.

Farfetch also operates multi-brand boutiques with customers in 190 countries. The rise in share price has grown its market capitalization to $11.26 billion, as of Tuesday morning. The company’s streetwear marketplace presence include Stadium Goods, an acquisition completed in early 2019 and brands under the New Guards Group, acquired late last year, that include licenses for Off White, Heron Preston and Palm Angels, among others. The company added to its stable this past January with its purchase of Opening Ceremony.

When private equity firms decide to exit stakes in portfolio companies, those firms are typically on the lookout for replacement investors as a seller needs a buyer to effect the intended sale. Reports surfaced on Monday that Chinese marketplace giant Alibaba was considering taking a $300 million investment in Farfetch.

There’s been no confirmation by either Farfetch or Alibaba of any investment plan, or that talks have even taken place.