Coty Inc. Class Action Lawsuit
- Company Name
- Coty Inc.
- Stock Symbol
- Class Period
- October 3, 2016 to May 28, 2020
- Southern District of New York
The Coty Inc. class action lawsuit charges Coty and certain of its current and former officers and/or directors with violations of the Securities Exchange Act of 1934 and seeks to represent purchasers of Coty common stock between October 3, 2016 and May 28, 2020, inclusive (the “Class Period”). The Coty class action lawsuit was commenced on September 4, 2020 in the Southern District of New York and is captioned Garrett-Evans v. Coty Inc., No. 20-cv-07277.
Coty is one of the world’s largest beauty companies. On October 3, 2016, Coty announced the completion of its blockbuster merger with The Proctor & Gamble Company’s (“P&G”) fine fragrance, color cosmetics, salon professional and hair color and certain styling businesses (“P&G Specialty Beauty Business”) for $12.5 billion to scale up its beauty business. On November 18, 2019, Coty announced another beauty brand acquisition – a 51% majority stake in Kylie Cosmetics, founded by Kylie Jenner, for $600 million.
The Coty class action lawsuit alleges that during the Class Period defendants made false and/or misleading statements and/or failed to disclose that: (1) despite being no stranger to beauty brand acquisitions, Coty did not have adequate processes and procedures in place to assess and properly value the P&G Specialty Beauty Business and Kylie Cosmetics acquisitions; (2) as a result, Coty had overpaid for the P&G Specialty Beauty Business and Kylie Cosmetics; (3) Coty did not have adequate infrastructure to smoothly integrate and support the beauty brands that it acquired from P&G, including an adequate supply chain; (4) as a result of its inadequate infrastructure, Coty was not successfully integrating the beauty brands it acquired from P&G and not delivering synergies from the acquisition; (5) and, as a result of the foregoing, Coty’s financial statements and defendants’ statements about Coty’s business, operations, and prospects, were materially false and/or misleading at all relevant times.
On February 9, 2017, Coty disclosed what it characterized as “short-term negative transitional impacts especially including significant trade inventory build in the first quarter of fiscal 2017 in parts of the P&G business,” indicating that the P&G Specialty Beauty Business may have been overvalued. On this news, the price of Coty stock fell nearly 9% from February 8, 2017 to February 10, 2017. Then, on August 22, 2017, Coty announced disappointing financial results for the fourth quarter and fiscal year ended June 30, 2017, including a 10% organic revenue decline in Coty’s Consumer Beauty division – signaling that the integration of P&G’s over 40 beauty brands was still not a reality. On this news, the price of Coty stock fell nearly 17% from August 21, 2017 to August 24, 2017.
Thereafter, on November 7, 2018, Coty announced a bigger than expected decline in first quarter fiscal year 2019 sales due to “several temporary supply-chain related headwinds,” which included “[w]arehouse and planning center consolidated disruptions in Europe and the U.S.” On this news, the price of Coty stock fell nearly 26% from November 6, 2018 to November 8, 2018. Afterward, on July 1, 2019, Coty announced the write down of about $3 billion in the value of the brands acquired from P&G as part of a four-year restructuring plan, confirming that the P&G Specialty Beauty Business had been overvalued. On this news, the price of Coty stock fell more than 14%.
Finally, on May 29, 2020, Forbes reported that Kylie Jenner “has been inflating the size and success of her business[ f]or years” – revealing that defendants had overvalued yet another acquisition. On this news, the price of Coty stock fell more than 13%.
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