The encyclopedia · Finance & Accounting · Financial decision · 2019–2020
Coty paid $600M for Kylie Cosmetics — then shareholders sued over inflated financials
The $1.2B valuation rested on revenue figures that did not match Coty's own filings. Forbes exposed the gap; the stock fell 13%; shareholders sued.
Coty · Kylie Cosmetics · 2019-11
What happened
In November 2019, Coty acquired a 51% stake in Kylie Cosmetics for $600 million, valuing the celebrity beauty brand at $1.2 billion. Coty cited an estimated $177 million in trailing twelve-month net revenues. The deal was the centrepiece of Coty's strategy to pivot toward prestige and celebrity-driven beauty.
In May 2020, Forbes published an investigation alleging that Kylie Jenner and her team had been inflating the size and success of the business for years, including accusations of fabricated income figures and altered tax returns. Forbes reported that revenue numbers previously provided by Jenner's team did not match the figures in Coty's public filings. Coty's stock fell more than 13% the next day.
In September 2020, Coty shareholder Crystal Garrett-Evans filed a class-action lawsuit in New York federal court alleging that Coty and its officers had violated securities laws by overpaying for Kylie Cosmetics without adequate valuation processes. Kylie Jenner and Kylie Cosmetics were not named as defendants.
Why it happened
- Coty's due diligence relied on financials provided by the seller's team without independent verification; the gap went undetected until Forbes investigated.
- The $1.2 billion valuation was anchored to a celebrity's personal brand and social-media reach, metrics that are difficult to audit and easy to inflate.
- Coty's board approved the acquisition as part of an urgent strategic pivot, and the pressure to close a marquee deal compressed the scrutiny a nine-figure acquisition demands.
The lesson
When the seller's team is also the brand, the financials they provide are marketing material — verify revenue independently before pricing the deal.
Aftermath
Coty continued to operate Kylie Cosmetics as part of its portfolio. The shareholder lawsuit sought class-action certification and compensatory damages. The case became a cautionary reference for celebrity beauty acquisitions and for the wider practice of valuing influencer-driven brands on unaudited revenue figures.
Sources
- The Fashion Law: Coty is Being Sued for Allegedly Overpaying for Inflated Kylie Cosmetics
- Nylon: A New Lawsuit Alleges Coty Overpaid For Kylie Cosmetics
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