Adidas shareholders claim that executives at the sneaker giant “intended to deceive” investors by never disclosing their concerns about working with rapper-turned-fashion designer Kanye West.
On April 28, the group filed a class-action lawsuit in the U.S. District Court for the District of Oregon against the brand. The complaint notes how investors could have been more prepared for its significant loss had the company shared its problems with the Yeezy founder, NBC reports.
Shareholders claim the financial injury they experienced due to Ye’s “personal behavior” could have been circumvented had Adidas’ former chief executive officer Kasper Rorsted and chief financial officer Harm Ohlmeyer been honest about the tumultuous relationship the sportswear company had with the influencer.
According to the complaint, Rorsted and Ohlmeyer either “intended to deceive” investors or “acted with reckless disregard for the truth” by keeping this information close to their inner circles.
The lawsuit alleges the brand has known for years that Kanye’s outlandish behavior and comments, possibly fueled by his bipolar disorder, were problematic and a potential risk that was never presented to investors during at least five annual reports.
The shareholders cite a Wall Street Journal article from November 2023. In it, various people state Rorsted had discussed the various controversies swirling around Kanye, and even that he was thinking about severing its partnership with him as far back as 2018.
The Wall Street Journal reported, “A 2018 presentation to members of the Adidas executive board, a group that included CEO Kasper Rorsted and the head of human resources, highlighted the risks for employees interacting with Mr. West and detailed mitigation strategies for the relationship with the Yeezy creator, including cutting ties with the rapper-turned-designer, documents show.”
The presentation reportedly was released on March 13, 2019.
The lawsuit states Adidas “ignored serious issues affecting the Partnership” with Kanye “and the resulting potential risk to shareholders” in a section outlining “Business Partner Risk.”
Kanye Reportedly Was A Risk Adidas Knew About
Before his controversial anti-Semitic comments, run for U.S. president, or his remarks about outlandish remarks about George Floyd’s death made in 2022, Kanye publicly spewed harmful rhetoric.
One occasion, mentioned in the lawsuit by the shareholders, was an interview on TMZ Live in May 2018. The multi-Grammy winner, backed by Candace Owens, then-said slavery “sounded like a choice” because it lasted for over “400 years.”
When asked about these comments, Rorsted, in an interview with Bloomberg, refused to comment on the brand’s partner, but said “Some comments we don’t support.”
“Tellingly, Rorsted also stated that West and the Yeezy footwear brand are a ‘very important part of our brand from a revenue standpoint and how we promote our products,’” the lawsuit states, adding he had no desire to stop working with him over the slavery comments.
The WSJ exposé detailed more current incidents that should have been red alarms that were not communicated by the c-suite to the shareholders.
It looked at a September 2022 meeting that Kanye documented in a mini-doc titled “Last Week.”
In the small meeting with two Adidas executives, Ye reportedly showed them a clip from one of his favorite porn movies, said one of them sounded like the male star, and alleged they were stealing his design.
Kanye says he did this as a way to communicate how he felt and ask for more money and power for his Yeezy brand.
Adidas did not end its relationship with Kanye after this interaction. Instead, it offered him the opportunity to sell Yeezy footwear directly to consumers, ownership of future designs, a percentage from the sales of Adidas properties that resemble the Yeezy products and a proposal to extend their partnership through 2026.
Failure To Communicate The Risk
The lawsuit alleges the company had vaguely referenced risks with other partners in the past and with Kanye instead of “stating that the Company had actually considered ending the Partnership as a result of West’s personal behavior, or how the Company’s reputation might be affected if his behavior as it related to the Company were to become public.”
Shareholders further noted that in 2019, 2020 and 2021 annual reports continued to express concern about the Kanye risk and/or “otherwise failed to mention risks relating to the Partnership.”
Regardless of how unorthodox officials saw Ye acting, they would not part ways or share information with investors. The choice that senior executives made was to allegedly come up with ways to pacify Kanye to stabilize the partnership — one that experts say accounted for 8 perecent of annual sales.
It Comes Down To Protecting The Bag
The Yeezy brand, brought into the company in 2015, was so lucrative for the company, making Adidas billions of dollars. It also allowed them to compete with Nike, which has dominated the market when it comes to streetwear and sneakers.
“The Yeezy shoes were extremely popular,” the lawsuit states. “By 2019, sales of Yeezy shoes hit over $1 billion. Further, Kanye West accumulated significant wealth as a result of the Partnership. By September 2019, Forbes ranked him as the Number 1 highest-paid hip-hop star, largely as a result of the Partnership.”
Backlash and Outcome
Still, after the backlash from his anti-Semitic comments, “White Lives Matter” T-shirts and a press tour to espouse his bigotry, Adidas announced it was severing ties with the artist on Oct. 25, 2022.
Shareholders believe this was too little too late and want to be compensated.
Adidas has expressed that the company did all it could do and acted appropriately regarding its Kanye issue.
“We outright reject these unfounded claims and will take all necessary measures to vigorously defend ourselves against them,” a representative for Adidas said in a statement.