Adidas faces lawsuit from investors over Kanye West partnership, fallout

Adidas is facing a class action lawsuit from investors who allege the company knew about offensive remarks and harmful behavior from Ye, the rapper formerly known as Kanye West, years before it ended its partnership with him.

The German sports brand severed ties with its star collaborator in late October, following Yi’s anti-Semitic comments on social media and in interviews.

At the time, Adidas said the company did not tolerate anti-Semitism and any other type of hate speech and called Ye’s statements and actions unacceptable, hateful and dangerous.

Weeks before the decision, at Paris Fashion Week, Yi also wore a White Lives Matter T-shirt which the Anti-Defamation League classifies as white supremacy that arose as a racist reaction to the Black Lives Matter movement.

The current lawsuit, filed in US District Court in Oregon on Friday, alleges that Adidas has been aware of the potential harm Ye’s problematic behavior could cause the company for some time by pointing to past incidents, including 2018 comments where Ye suggested that slavery was a choice. and reports of Yi making anti-Semitic remarks to Adidas staff.

The lawsuit representing people who purchased Adidas securities between May 3, 2018 and February 21, 2023 also alleges that Adidas failed to take precautionary measures to limit financial losses in the event of Ye’s partnership being terminated.

The lawsuit accuses Adidas, former CEO Kasper Rusted, and chief financial officer Harm Ohlmeyer of being aware of false or misleading statements about the partnership with Ye, that they are not on the list of defendants in the suit, or of their “recklessness.”

The lawsuit cites a Wall Street Journal article from November that reported that executives, including Rrsted, had discussions dating back to 2018 about the risks of Ye’s actions and the possibility of severing ties with the artist.

The complaint also refers to the company’s annual reports from 2018 to 2021, which the suit says failed to disclose risks related to Adidas’ partnership with Ye.

Adidas has retracted the allegations made in the Friday suit.

Adidas said Monday in a statement sent to the Associated Press that we completely reject these unsubstantiated allegations and will take all actions necessary to vigorously defend ourselves against them.

Friday’s lawsuit seeks unspecified damages, payment of legal fees and such other relief as the court may deem fair and proper.

During his collaboration with Adidas, Ye designed the massively successful Yeezy line. According to Suit Friday, by 2019, Yeezy footwear sales exceeded $1 billion.

Since cutting ties with Ye, Adidas has lost hundreds of millions of dollars. The termination of the partnership cost €600m in lost sales in the last three months of 2022, which helped push the company to a net loss of €513m. The decline, which was also attributed to higher supply costs and lower revenues in China, contrasts with a profit of €213m in the fourth quarter of 2021.

There could be more losses to come, especially as the company grapples with what to do with existing Yeezy inventory. In March, the company expected to hit 2023 earnings by €500 million if it decided not to repurpose Yeezy products remaining in inventory. The company also expected an operating loss in 2023 of 700 million euros.

(Only the title and image for this report may have been reworked by the Business Standard team; the rest of the content is generated automatically from a shared feed.)