Adidas has successfully defended itself against an appeal from shareholders who accused the sportswear giant of concealing misconduct by rapper-entrepreneur Kanye West, also known as Ye, prior to the collapse of their partnership in 2022. A ruling by the 9th US Circuit Court of Appeals in San Francisco found that Adidas did not mislead investors, dismissing claims that they suffered financial losses after the company severed ties with West.
The partnership between Adidas and West, centered around his Yeezy brand, had been one of the company’s most lucrative collaborations. At its peak, Yeezy luxury trainers generated approximately €1.5 billion ($1.17 billion; £870 million) in sales in 2021, cementing the line as a major driver of Adidas’ revenue. However, the alliance unraveled in 2022 following a series of controversies surrounding West, including a public display of a “White Lives Matter” T-shirt at a fashion show and subsequent antisemitic remarks online. These actions prompted Adidas to review and ultimately terminate the partnership, a decision that caused the company’s shares to drop and left hundreds of millions of euros in unsold Yeezy inventory.
Court documents show that the shareholder lawsuit, led by investment firm HLSA-ILA Funds, alleged Adidas continued collaborating with West despite being aware of his controversial behavior for several years. The plaintiffs claimed the company had “internally grappled” with West’s actions but failed to inform investors of the potential risks, arguing that this omission misled shareholders and contributed to financial losses when the partnership ended.
The 9th Circuit Court of Appeals, however, sided with Adidas. The judges concluded that investors should reasonably expect partnerships with high-profile celebrities to carry inherent risks, including the possibility of improper conduct. The court noted that a reasonable investor would have anticipated that working with a celebrity like West could involve unpredictable behavior that might affect the brand or stock price.
The district court had previously dismissed the case, and HLSA-ILA Funds pursued an appeal, arguing that Adidas’ failure to disclose internal concerns about West’s conduct constituted investor deception. Wednesday’s appellate decision reaffirmed the lower court’s dismissal, providing relief to Adidas and closing the legal challenge for now.
Adidas Wins Appeal Over Kanye West Shareholder Lawsuit
The fallout from the partnership’s termination had significant financial and operational implications for Adidas. At the time of the split, the company was left with more than €1 billion worth of unsold Yeezy footwear in storage. To address the inventory issue, Adidas announced in 2023 plans to sell the products while donating a portion of the proceeds to organizations focused on combating hate, aligning the move with broader corporate social responsibility goals.
West, who was not a party to the lawsuit, faced widespread criticism from the public and business community due to his repeated antisemitic statements and promotion of conspiracy theories. In addition to Adidas, several other companies, including Gap and JP Morgan, severed their ties with the rapper following the controversies. These actions underscored the broader reputational and financial risks associated with high-profile celebrity collaborations.
Adidas declined to comment on the ongoing legal matters, and representatives for HLSA-ILA Funds and West did not respond to inquiries from the BBC. Nevertheless, the ruling has been viewed as a significant affirmation of corporate discretion when managing celebrity partnerships, particularly in situations where unforeseen personal conduct may affect business operations.
Analysts have noted that the Adidas-Yeezy partnership was exceptionally lucrative while it lasted, highlighting both the potential rewards and risks inherent in celebrity collaborations. While Yeezy’s popularity and cultural influence were undeniable, the controversies surrounding West demonstrated how volatile such partnerships can become when external behavior clashes with corporate values or public expectations.
The court’s decision also reinforces the principle that shareholders must account for the inherent unpredictability of high-profile collaborations. By recognizing that investors should anticipate potential risks associated with celebrity behavior, the ruling sets a precedent for future cases involving corporate disclosure and investor claims tied to partnerships with public figures.
Despite the financial and reputational challenges resulting from the partnership’s collapse, Adidas continues to maintain its position as a global sportswear leader. The company has moved to repurpose the unsold Yeezy inventory in ways that promote social good, signaling a commitment to responsible corporate practices even amid high-profile controversies.
The Adidas-Yeezy saga serves as a cautionary tale for businesses navigating the complex intersection of celebrity influence, brand image, and investor relations. While the collaboration brought significant profits during its peak, the eventual fallout highlights the importance of evaluating and managing the risks associated with celebrity endorsements and partnerships in an increasingly public and connected world.
Source- BBC
