Gap Market Cap Increases By $1.5 Billion, Hours After Announcing Kanye West Partnership

By on June 28, 2020 in ArticlesBillionaire News

Never let it be said that Kanye West doesn't still have influence and power in the fashion world. The rapper-turned-designer recently proved this in a big way when he announced an expansive 10-year deal with fashion retailer Gap that will first entail a new Yeezy clothing line for men, women, and children, a deal which the very announcement of which caused Gap stock to spike by some $1.5 billion in total market value at its first day peak.

The announcement couldn't have come at a better time from the Gap's perspective, since they, like virtually all other retailers, are struggling as a result of the coronavirus pandemic. CNBC reports that the partnership between West and the retailer has been in the works from before the virus was a known issue, though.

In a press release, Kanye and Gap's new Yeezy line will be made up of "modern, elevated basics" available "accessible price points," both of which sounded good to investors, since at its peak on the first day of the announcement Gap's total market cap had seen an increase of $1.5 billion, closing the day with an increase of more than $700 million – put simply the question wasn't whether the announcement was great for Gap's stock market fortunes, but exactly how great, a question that will continue to be answered in the coming months before the debut of the new line sometime next year.

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Precise financial terms of the agreement between West and Gap aren't known, but the press release announcing the collaboration specifically describes West as Yeezy Supply's sole owner, meaning that he didn't have to give up any ownership of his brand in order to facilitate the deal. Yeezy Supply will of course get royalties from sales of the new products, and a recent SEC filing reveals as many as 8.5 million shares of Gap stock would be granted to Kanye's company depending on certain annual sales benchmarks: $250 million for one third of the stock, $450 million for the second third, and $700 million for the last third. 8.5 million shares of Gap stock amounts to a two percent ownership stake, and one that would be worth around $100 million today, and if the store's fortunes continue to rise by way of Kanye's collaboration there's no telling how much the deal could be worth when all is said and done.

Some might be surprised to see Kanye West sign such a major deal with Gap, but actually this isn't the first time the rapper and the retailer have worked together: as longtime fans of Kanye's are already aware, he worked at a Gap store as a teenager in Chicago.

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