Kylie Jenner's new partner got an outcome it did not saw coming.
Coty recently acquired a 51 percent equity stake in Kylie Cosmetics for a whopping $600 million. The company wants to make Kylie's beauty line a global brand, and they saw Jenner's rising influence as something that both of them can benefit from.
However, in an surprising turn of events, Coty's stocks dropped a few days after taking control of Kylie Cosmetics.
According to a report by TMZ, Coty shares plummeted to $11.53 per share after trading closed this week. It is their lowest for the month of November, which is not a good sign considering their recent acquisition.
It is worth noting, however, that Coty's shares increased to 12.22 per share after the Kylie Cosmetics sale. However, it did not last and the shares suffered a roughly 5.5 percent decline.
In a report published by CNBC in June 2019, it was cited that Coty Inc. could not really afford to make substantial acquisitions. With that said, valuing Kylie Cosmetics at $1.2 billion and buying controlling interest may have really affected the company's stock trading.
What The Experts Expected
As reported by CNBC, Miller Tabak equity strategist Matt Maley predicted that buying the higher stake of Kylie Cosmetics is a high risk high reward ploy.
Maley also tackled how Coty's stocks sucker-punched the bottom of the trendline for four straight years.
"A little bit more risk but more reward because whenever you buy any stock in the early stages of a change in trend, it always gives you a little more upside potential," Maley said.
Moreover, the portfolio manager of Tocqueville Asset Management John Petrides expected that Coty could acquire unrivaled growth once it partnered with key influencers.
Petrides also talked about Kylie being the current highest-paid influencer on Instagram at $1.2 million per single post. Petrides, after going through the numbers of Kyie's influence, deduced that Coty would be in good hands because of Jenner's "influencer power" over her 151 million Instagram followers.
Meanwhile, Kylie and Co. is still in a partnership with Ulta Beauty after they struck a deal in Nov. 2018 to sell her products across the U.S. in 1,100 Ulta Beauty stores.
Unlike what Coty faced this week, Ulta Beauty saw tremendous sales growth every quarter after establishing a relationship with Kylie Cosmetics.
Not Because of Kylie?
While it is easy to point on the Kylie Cosmetics acquisition as the reason for the drop in Coty shares, the overall trend in among beauty brands does not look promising entirely.
Out of four top beauty brands (Coty included), three companies experienced a downward trend.
The Estée Lauder Companies Inc. -- the home of Clinique, M.A.C, and Origins -- gave a weak outlook for this year even after hitting their expectations.
Meanwhile, NU Skin Enterprises failed to hit its thirrd quarter sales target while Inter Parfums Inc. also hit the bottom this year.