A class action lawsuit has been filed in the United States District Court for the Southern District of New York on behalf of investors that purchased Coty Inc. common stock between October 3, 2016 and May 28, 2020.
 
On October 3, 2016, Coty issued a press release announcing the completion of its merger with The Procter & Gamble Company’s fine fragrance, color cosmetics, salon professional and hair color and certain styling businesses for $12.5 billion to scale up its beauty business.
 
Then, on November 18, 2019, Coty announced another beauty brand acquisition – a 51% majority stake in Kylie Cosmetics for $600 million in order to “build and further develop Kylie’s existing beauty business,” which “realized an estimated $177 million net revenues for the trailing twelve months (TTM).”
 
Accusations Against Coty
 
The complaint against Coty alleges that 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, and as a result, Coty overpaid for the P&G Specialty Beauty Business and Kylie Cosmetics.
 
Also, according to the complaint, 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. 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.
 
Furthermore, the lawsuit alleges that Coty’s financial statements and defendants’ statements about Coty’s business, operations and prospects, were materially false and/or misleading at all relevant times.
 
Investors have until November 3, 2020 to apply to the Court to be appointed as lead plaintiff in the lawsuit.