London-based online luxury fashion retail platform Farfetch plans to raise $250 million by issuing convertible senior notes to Chinese social and gaming giant Tencent and San Francisco-based investment firm Dragoneer.
Tencent committed to purchase $125 million of the notes in the private placement, while Dragoneer agreed to buy the remaining $125 million, the New York-listed online fashion marketplace announced.
The investment will supplement Farfetch’s current liquidity position. The company recorded about $320 million in cash and cash equivalent balance as of December 31, 2019.
Founded in 2007 by British-based Portuguese billionaire businessman José Neves, Farfetch began as an e-commerce marketplace for luxury boutiques around the world. The marketplace now connects customers in 190 countries with items from more than 50 countries and over 1,200 brands, boutiques and department stores.
Farfetch went public on the New York stock exchange in September 2018, raising $885 million after the issue of 33.6 million shares. The offering valued the firm at over $5.8 billion.
The investment “elevates the ongoing relationship” between Tencent and Farfetch, in which the British firm operates as “a premier luxury gateway to China” to help western brands reach Chinese consumers through the WeChat platform, said Farfetch.
Farfetch currently powers more than 80 luxury brands for their developments and product launches on WeChat, the multi-purpose messaging, social media and mobile payment app developed by Tencent with at least 1.15 billion monthly active users (MAUs). Some of its clients include Moncler, Balenciaga, Saint Laurent, Armani, and Ralph Lauren.
Tencent will build on the cooperation with Farfetch, supporting the company “as it accelerates its growth in China and enhances its customer experience and offerings in the region,” said Martin Lau, president of Tencent.
This is the latest investment made by Tencent after the company said roughly two weeks ago that it plans to step up investment overseas with a focus on sectors like “smart retail.” The company disclosed that it has a portfolio of over 800 companies worldwide, including 70 listed firms and over 160 valued at more than $1 billion.
José Neves, founder, CEO and co-chair of Farfetch expects the company to “achieve profitability in the medium term” by leveraging Tencent’s technology expertise and Dragoneer’s strengths in supporting growth-oriented technology companies.
Dragoneer, with over $8.5 billion in assets under management (AUM), has backed companies including short-term home rental firm Airbnb, Indian e-commerce upstart Flipkart, instant messaging app Slack, media services provider Spotify, Square, and cloud technology company Twilio, among others.
Besides the e-commerce platform, Farfetch also delivers Farfetch Platform Solutions, which services enterprise clients with e-commerce and technology capabilities; Browns and Stadium Goods, which offer luxury products to consumers; and New Guards Group, a platform for the development of global fashion brands.
The firm makes investment in innovative technologies, business solutions, and services for the luxury fashion industry, such as its Store of the Future augmented retail solution.