Shares in Coty jumped 15% after the cosmetics company announced that it is currently in talks with Kim Kardashian West for a possible collaboration “with respect to certain beauty products”.
The stock soared to $4.80 in afternoon trading in the U.S.
“There can be no assurance that an agreement for such a collaboration will be reached or as to the terms of any such agreement,” Coty said in a SEC filing. “The company does not intend to comment further on such a potential transaction unless and until it otherwise deems further disclosure is appropriate or required.”
The talks come just months after the collaboration agreement with Kardashian’s sister Kylie Jenner. Coty acquired a controlling stake in Kylie Jenner’s cosmetics company, Kylie Cosmetics, for $600 million.
The deal increased the company’s debt load, but at the time management indicated that it expected its return on invested capital to exceed the associated cost by 2023.
Earlier this week Coty appointed its chairman Peter Harf as CEO to help spearhead a strategic turnaround plan of its business, which sent shares up as much as 20%. As part of the plan, the indebted cosmetics maker struck a deal to sell a majority stake in its retail and hair business to buyout firm KKR & Co. (KKR).
In his new role, Harf will be part of a new three-person Executive Committee to make sure that Coty takes the right steps to become a more profitable company and drive improvements across the business.
This week’s news sent the stock up some 33% trimming its year-to-date plunge to 56%.
Wall Street analysts are sitting on the fence when it comes to Coty stock. The Hold consensus consists of 7 Hold, 1 Sell and 1 Buy rating. Following the sharp share plunge this year, the $5.78 average analyst price target implies 21% upside potential over the coming 12 months. (See Coty stock analysis on TipRanks).
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