Court sides with Adidas in appeal over Kanye West collaboration

Adidas has won an important legal victory in the United States after a San Francisco court rejected an appeal from shareholders who accused the company of hiding Kanye West’s misconduct before their partnership collapsed in 2022. The decision brings some relief to the sportswear giant, which has spent the past two years managing the financial and reputational fallout of its split from one of its most successful collaborators. Investors had claimed that Adidas misled them by failing to disclose the business risks tied to West’s unpredictable actions. But judges ruled that a reasonable investor would understand that partnerships with high-profile celebrities often carry inherent risks, especially when behaviour becomes controversial.

How the partnership broke down

The collaboration between Adidas and West had once been a defining relationship for both the brand and the musician. The Yeezy line became one of Adidas’ top revenue drivers, known for its distinctive designs and strong cultural impact. But the partnership began to unravel after West appeared at a fashion show in 2022 wearing a T shirt with the phrase White Lives Matter, followed by repeated anti Semitic remarks online. These actions triggered widespread backlash and forced Adidas to place the Yeezy partnership under review. As pressure mounted, Adidas eventually terminated the collaboration and removed Yeezy products from sale. Other companies quickly followed, with brands like Gap and JP Morgan ending their relationships with West. Investor confidence also took a heavy blow, leading to a sharp drop in Adidas share prices as the company dealt with unsold Yeezy inventory and uncertainty about its next steps.

Why investors challenged Adidas

Shareholders represented by HLSA ILA Funds argued in court that Adidas had known about West’s problematic conduct for years but failed to disclose it properly in financial reports. They claimed the company continued the collaboration even while internally debating the risks, leaving investors unaware of the potential for sudden collapse. The filing suggested that earlier transparency might have helped investors make more informed decisions. However, the court disagreed, saying it was unreasonable to expect a company to foresee or publicly detail every possible behavioural risk tied to a celebrity partner. The judges noted that celebrity partnerships are complex and often unpredictable, making some level of uncertainty inevitable.

What the ruling means for Adidas

With the appeal dismissed, Adidas avoids a potentially lengthy legal process and major financial penalties. The company has already been working to move past the Yeezy fallout, including deciding in 2023 to sell remaining Yeezy shoes and direct portions of the revenue to groups working against hate. The partnership’s collapse had been costly. In 2021, Yeezy products generated around €1.5 billion, making it one of Adidas’ most valuable product lines. When the collaboration ended, more than €1 billion worth of Yeezy stock was left unsold, contributing to financial strain and public scrutiny. Despite this, Adidas has spent the past year rebuilding investor confidence and focusing on new strategies to strengthen its brand identity.

Lessons for the industry

The case highlights broader questions about how companies manage high profile collaborations and the risks that come with them. As celebrity partnerships grow in influence, brands face increasing pressure to balance creative freedom with responsible oversight. Adidas’ experience shows how quickly public sentiment can shift and how misconduct, even if external to the company, can have severe financial consequences. The ruling also reinforces the idea that investors must recognise the fluid nature of brand partnerships, where personal behaviour and public image can dramatically alter business outcomes. For Adidas, the legal win does not erase the challenges of recent years, but it does give the company a clearer path to move forward.