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Tuesday, December 1, 2020

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Shares of LVMH (EPA: LVMH) closed over 1% on the day after the fashion giant filed a countersuit against Tiffany in an attempt to quit the $16.2 billion buyout deal.

Fundamental analysis: Countersuit launched

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LVMH filed a countersuit after walking away from the deal that would have been the largest-ever in the luxury sector. In the lawsuit filed on September 28 in Delaware, it is stated that LVMH “continues to have full confidence in its position that the conditions necessary to close the acquisition of Tiffany have not been met.” 

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It also says that the “spurious arguments put forward by Tiffany are completely unfounded.” The filing represents the latest news since the LVMH owner decided to walk away from the takeover in early September. At the time, LVMH stated that it wasn’t in a position to complete the buyout of Tiffany “as it stands.” 

The reasons for scrapping the deal were the threat of U.S. tariffs on French goods as well as Tiffany’s request for a deadline extension of the deal until the end of the year. After LVMH announced it’s walking away, Tiffany immediately took legal action and filed a suit in Delaware to enforce the deal, saying the French government’s request is unfounded.

In its filing on Monday, LVMH said the coronavirus crisis has induced “material adverse effect” on the company. The French conglomerate also cited Tiffany’s “mismanagement of its business” which, it said, constitutes an obvious violation of its obligation to operate in the natural course.

“For instance, Tiffany paid the highest possible dividends while the company was burning cash and reporting losses. No other luxury company in the world did so during this crisis. There are many examples of mismanagement detailed in the filing, including slashing capital and marketing investments and taking on additional debt,” LVMH said in a statement.

Technical analysis: LVMH stock price recovers

LVMH stock price gained nearly 3% this week to recover a portion of losses from the second part of September. Given the legal war between LVMH and Tiffany, it is unlikely that we will see a major move higher this year. 

screen shot 2020 09 29 at 9 35 33 pm
LVMH stock price chart

The buyers have now pushed the price action above the €400 mark as they look to test the next resistance line at €415. The confluence of moving average lines below €390 will offer further support if needed. 


French conglomerate LVMH filed a countersuit against Tiffany in an effort to scrap the $16.2 billion takeover deal. Shares are recovering to trade above the €400 handle.

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