Authentic Brands Group sues checkout startup Bolt - The Entrepreneurial Way with A.I.

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Monday, May 2, 2022

Authentic Brands Group sues checkout startup Bolt

#SmallBusiness

Brand licensing and marketing company Authentic Brands Group sued one-click checkout startup Bolt Financial in March, according to a complaint filed with the U.S. District Court in the Southern District of New York. In the lawsuit, ABG alleges Bolt “utterly failed” to deliver on its technology promises, which resulted in lost sales for the brand management firm's fashion brands, which include Forever 21, Nautica, Reebok and Lucky Brand, among others. The story was reported earlier by Bloomberg.

Bolt denies the claims in ABG's lawsuit and has filed a motion in court to dismiss it. ABG also says in its filing that Bolt “consistently overstated” the partnership with ABG brands to pull in more venture funding from investors in the process of “unjustly enriching itself” by raising capital using ABG’s name

In a March 18 court filing, attorneys representing Bolt sought to dismiss the complaint, calling the lawsuit a “transparent attempt” to rework contract terms. Other claims by ABG “are a hodgepodge of diversionary accusations largely designed to cast aspersion on Bolt” and interfere with Bolt’s business and financing activities, the filing alleges. Bolt says it gives merchants Amazon-like convenience when it comes to online checkout by storing shoppers’ information to make subsequent experiences frictionless.

Authentic Brands' complaint alleges that Bolt was to develop a new online checkout and customer loyalty platform for use by ABG's brand partners by January 2021, but fell short of the deadline with technology that didn't work properly.

But Bolt has rejected those allegations in its court motion and in a statement. Bolt said in its court filing that ABG "filed suit because they failed in their efforts to induce Bolt to renegotiate and amend those core terms in ways that would materially advantage plaintiffs and fundamentally transform the bargain."

"We are committed to providing all of our customers with a great product and we are thankful for our wonderful partnership with Forever 21 and Lucky Brand which continues to be strong," Bolt CEO Maju Kuruvilla said in the statement. "Although we deny all of Authentic Brands Group’s allegations, it's clear that ABG has confidence in Bolt as they are fighting to own significant equity in our business. We look forward to continuing to work closely with Forever 21 and Lucky Brand on delivering the best checkout experience for their shoppers."

In its filing, ABG said its portfolio of about 50 brand licenses generates approximately $14 billion in annual retail sales. ABG's largest licensee is Sparc Group, which it jointly owns with Simon Property Group, and which runs operations for brands including Nautica, Forever 21, AĆ©ropostale, Lucky Brand and Brooks Brothers.

ABG said Bolt failed to honor a commitment to provide a checkout product with the ability to “seamlessly integrate” into its partners’ websites by the January deadline. ABG also alleges Bolt didn’t provide a product until November 2021.

The complaint said the rollout of Bolt’s product for three of ABG’s brands “has been plagued by Bolt’s repeated failures” to deliver the expertise it touted.

Bolt led a “disastrous integration” of its checkout software services on the Forever 21 mobile app, the lawsuit alleges, noting a “significant drop” in sales conversions that led that brand to lose an estimated more than $150 million in online sales during and immediately after the checkout integration period. 

Due to these issues, Bolt’s products are used by just two of ABG’s brands, Forever 21 and Lucky Brand, the lawsuit said. Another ABG brand, Brooks Brothers, was “forced to abandon, at least temporarily,” its integration with Bolt in June 2021, per the complaint. 

Those three brands are listed prominently on Bolt’s website. Bolt’s Chief Business Officer Bob Buch touted the value of partnerships, such as that with ABG, during a January interview with Payments Dive, noting the benefits of working with such brand groups to power online checkout and loyalty programs for a number of retailers.

ABG also said Bolt violated confidentiality provisions of agreements between the two companies by repeatedly sharing details of ABG’s business with the public and potential investors. In some cases, information Bolt shared was “materially false and misleading to investors,” and Bolt has consistently “overstated the extent of its integration” with ABG’s brand partners, the filing says.

The complaint accused Bolt of trying to “piggyback” on the success of ABG, noting Bolt’s mention of Reebok during investor presentations when ABG had not yet acquired the brand. 

Bolt’s most recent $355 million funding round completed in January valued the company at $11 billion. Since its 2014 founding, the checkout startup has raked in $963 million in capital. Earlier this month, Bolt announced its acquisition of crypto firm Wyre for $1.5 billion.

ABG also alleged “a key aspect” of its agreement with Bolt included the right to purchase up to 5% of the checkout startup’s equity, “a right currently valued at over $500 million.” In its motion to dismiss the complaint, Bolt contends that provision was dependent upon the success of a loyalty program which hasn’t launched.

Bolt CEO Maju Kuruvilla

Permission granted by Bolt

 

Attorneys representing ABG and Bolt didn’t respond to messages seeking comment. 

Bolt founder Ryan Breslow, who has taken to Twitter to rant against high-profile Silicon Valley players like digital payments startup Stripe, didn’t directly address the news Tuesday on his Twitter account; Breslow left his CEO post and became Bolt's executive chairman in January.

In November 2021, ABG put plans for an IPO on hold and sold significant equity stakes to investment firms CVC Capital Partners and HPS Investment Partners.





via https://www.aiupnow.com

Caitlin Mullen, Khareem Sudlow