Court sides with Adidas in appeal over Kanye West collaboration

Osmond Chia, Business reporter

Adidas has fended off an appeal from shareholders who accused it of hiding misconduct by rapper-entrepreneur Kanye West - otherwise known as Ye - before their partnership broke down in 2022.

A San Francisco court said the sportswear giant did not mislead investors, who claimed they had lost money after Adidas shares plunged when it cut ties with West.

The Yeezy tie-up with West had been one of Adidas' most successful partnerships, but its collapse after a spate of anti-Semitic comments by the rapper cost the brand hundreds of millions of dollars.

The BBC has contacted Adidas for comment but could not reach the firm leading the class action or West's team.

West, who is not party to the lawsuit, was widely criticised after repeatedly making antisemitic remarks and promoting conspiracy theories.

His Yeezy brand collaboration with Adidas was put under review after he showed a "White Lives Matter" T-shirt design at a fashion show in 2022. Shortly after, he posted anti-Semitic comments online, which prompted Adidas to pull his products from sale.

West's behaviour also prompted several companies, including Gap and JP Morgan, to sever ties with the rapper.

Court documents filed on Wednesday show that HLSA-ILA Funds, the firm representing investors, alleged that Adidas continued its partnership with West despite knowing about his controversial conduct for years.

The filing claims Adidas "internally grappled" with West's behaviour but misled shareholders by failing to disclose the risk in its reports.

The 9th US Circuit Court of Appeals in San Francisco ultimately sided with Adidas.

The court said on Wednesday that a reasonable investor would know that a partnership with a celebrity like West could come with "inherent risks relating to improper behaviour".

A district court had previously dismissed HLSA-ILA's case, and the firm later appealed.

The collapse of Adidas' partnership with West caused the German firm's share price to tank in 2023.

Yeezy, luxury trainers designed by West, had been a particularly lucrative line of products for Adidas, generating around €1.5bn (£870m; $1.17bn) in sales in 2021.

The partnership breakdown left Adidas with more than €1bn worth of Yeezy shoes sitting in storage. In 2023, the brand announced that it would sell those products and donate some of the proceeds to charities who worked on combating hate.