The shares of fashion company Capri crashed by 48.81% on Friday after US District Judge Jennifer Rochon blocked its proposed merger with rival Tapestry.
Capri, which is known for its brands Versace, Jimmy Choo, and Michael Kors, agreed to sell itself to Tapestry back in 2023 in an $8.5 billion deal. The companies argued that the merger would position them to compete with European fashion houses, which are increasingly pushing for a bigger slice of the US market.
The merger was approved by regulators in the European Union and Japan, but the US Federal Trade Commission decided to challenge the deal under the premise that it would make a behemoth company that would have the power to unreasonably hike prices.
Capri was hopeful for a deal due to the widespread issues it faced across its portfolio. This, coupled with weakening demand for luxury goods, has taken a toll on the company’s business. Experts predict that Capri might not abandon plans to sell itself and could seek another buyer.
After tumbling 48.81%, Capri’s stock closed at $21.26 per share on Friday. The slide brought it to 57.74% down year-to-date.
On the other hand, Tapestry’s shares surged by 13.54% after the news that the merger was blocked. The overall sentiment is that acquiring Capri would pose an unnecessary risk for the company.