Gap shares soared Friday after Kanye West shared a photo that touted his collaboration with the retailer.
Shares closed up 18.8% Friday at $12.07, but had been up as much as 40% earlier in the day. The move added more than $700 million to Gap’s market cap, pushing it to about $4.5 billion.
Gap and West are developing a clothing line for men, women and kids that will be sold in its stores and online. The retailer said in a news release that the items from his fashion brand, Yeezy, will be made up of “modern, elevated basics” sold at “accessible price points.” The new line will debut in 2021.
West is the sole owner of the Yeezy brand, Gap said in its press release.
The partnership is a ten-year agreement, a person familiar with the deal’s terms said. Gap did not disclose terms of the deal, but said Yeezy will receive royalties and may get equity based on how much it sells. Gap has issued Yeezy Supply warrants for up to 8.5 million shares depending on whether the brand meets certain sales targets, according to a filing with the Securities and Exchange Commission.
Yeezy Supply is guaranteed the first third of those shares if annual net sales of the Gap-Yeezy line hit $250 million and the pursuant thirds if sales reach $450 million and $700 million annually. Those warrants expire 20 days after the company confirms its sales for fiscal 2025.
Following Friday’s rally, the total stake is worth more than $100 million at the current share price. In all, Yeezy Supply could have up to a 2% ownership in Gap, based off the company’s current share count.
Yeezy already has a shoe partnership with sports brand Adidas. A spokesperson for the German company declined to comment on the Gap collaboration when asked about it on Friday.
In its announcement of the deal, Gap said West’s experience working in one of its stores has come full circle.
“We are excited to welcome Kanye back to the Gap family as a creative visionary, building on the aesthetic and success of his YEEZY brand and together defining a next-level retail partnership,” Mark Breitbard, the company’s global head of brand, said in a news release.
Source: CNBC
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