A group of Adidas shareholders have taken legal action over the company’s dealings with Kanye West.
The investors allege inappropriate behaviour by West, legally known as Ye, was ignored during his nine-year Adidas deal.
The class action is on behalf of those who bought Adidas shares between 2018 and 2023.
Kanye West and Adidas
West began work with Adidas in 2013 after his relationship with Nike broke down.
His own ‘Yeezy’ Adidas shoes became extremely successful. Yeezy shoe sales had surpassed $AU1.5 billion by 2019.
West made a slew of antisemitic and racially abusive comments in the second half of 2022. Adidas ended its partnership with West in October last year after facing public scrutiny and being threatened with boycotts.
Is Kanye West being sued?
The class action hasn’t named West as a defendant in the case and is only suing Adidas.
The investors say Adidas knew about West’s inappropriate behaviour years before the deal was terminated, but didn’t take any steps to inform shareholders of the harm this could cause to the business.
The class action cited a previously-made comment by West suggesting U.S. slavery was a choice for enslaved people.
Antisemitic comments to Adidas staff members, including saying he wanted to name an album after Adolf Hitler, were also listed in the court documents.
The investors say they were misled by Adidas’ alleged failure to warn them about West and the potential vulnerability to company value caused by a sudden termination.
They also say that by failing to disclose this information, Adidas’ market price was artificially inflated, meaning investors paid more for the shares than what they were worth.
Adidas has said it “outright rejects” the “unfounded claims” from the class action.
The Yeezy brand
Adidas has predicted significant losses from the end of West’s partnership.
They said in February a failure to sell remaining Yeezy stock would lower company revenue by about $AU2 billion.
Adidas also said a write-off of existing Yeezy inventory would drive a downturn in the company’s operating profit by $AU830 million, and drive a 2023 operating loss projected at over $AU1.1 billion.