A US appeals court has sided with Adidas in a lawsuit brought by shareholders who claimed the company misled investors about risks tied to its collaboration with Kanye West before the partnership collapsed in 2022.
Court upholds dismissal of shareholder lawsuit
The 9th US Circuit Court of Appeals in San Francisco ruled on Wednesday that Adidas did not mislead investors about the risks associated with its relationship with the rapper, also known as Ye. The shareholders had accused the sportswear company of hiding West’s alleged misconduct, which they said caused financial losses when Adidas cut ties with him and its share price fell.
The appeals court said a reasonable investor would understand that partnerships with celebrities such as West involve “inherent risks relating to improper behaviour.” A lower district court had previously dismissed the case, and the investor group HLSA-ILA Funds later filed the appeal.
Claims that Adidas concealed known risks
Court filings show that HLSA-ILA Funds alleged Adidas continued its partnership with West even though it had been aware of his controversial behaviour for years. The plaintiffs claimed the company “internally grappled” with his conduct while failing to disclose those risks in public reports to shareholders.
The court rejected those arguments, finding that Adidas was not required to make additional disclosures beyond what investors could reasonably infer about the risks of such a high-profile partnership.
West was not a party to the lawsuit. The BBC said it was unable to reach the law firm representing the investors or West’s representatives for comment. Adidas was also contacted for comment.
Collapse of the Yeezy partnership
Adidas ended its partnership with West in 2022 after he made a series of antisemitic comments and promoted conspiracy theories. The collaboration was put under review after West appeared at a fashion show wearing a “White Lives Matter” T-shirt design. He later posted antisemitic remarks online, which led Adidas to withdraw Yeezy products from sale.
West’s behaviour also led other companies, including Gap and JPMorgan, to cut ties with him.
The collapse of the partnership had a significant financial impact on Adidas. Yeezy, the line of luxury sneakers designed by West, generated about €1.5bn (£870m; $1.17bn) in sales in 2021, making it one of the company’s most profitable ventures.
Financial fallout for Adidas
After the partnership ended, Adidas was left with more than €1bn worth of unsold Yeezy shoes in storage. In 2023, the company said it would sell the remaining stock and donate part of the proceeds to organisations working to combat hate.
Shares in the German sportswear company fell sharply in 2023 following the breakdown of the Yeezy deal.
Featured image credits: Pexels
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