Adidas secures win in investor case over Ye partnership fallout

Sportswear giant Adidas has secured a legal victory in a securities case linked to its prior partnership with Ye – formerly Kanye West.

The US Court of Appeals in San Francisco affirmed a district court’s dismissal of claims brought by shareholder HRSA-ILA Funds, according to a court filing.

The lawsuit alleged that Adidas had misled investors by downplaying risks tied to its Yeezy collaboration and did not disclose internal concerns regarding Ye’s behaviour.

HRSA-ILA argued that Adidas should have warned investors that Ye’s “antisemitic and other improper behaviour” posed a threat to the company, particularly in the wake of a drop in share price after the partnership ended in 2022.

The appeals court rejected the claims, ultimately concluding that Adidas had sufficiently addressed risks in public filings.

The company’s Business Partners Risk disclosure stated that improper behaviour by “athletes, influencers or partners in the entertainment industry could have a negative spill-over effect”.

HRSA-ILA said this language was misleading because it posed any risk as hypothetical, yet the court disagreed, noting that the disclosure focused on potential negative effects rather than the behaviour itself.

The court further highlighted that Ye’s public controversies were widely known before Adidas ended the partnership and thus, “a reasonable investor would know that a partnership with a celebrity partner like Ye would come with inherent risks”.

The circuit judges ruled that HRSA-ILA failed to show that Adidas or its executives acted with scienter – deliberate or reckless intent to mislead. With the ruling affirmed, Adidas closes a significant legal chapter.