Does Kanye West Still Have Billion Dollars?

I've received roughly 30 emails and text messages in the last few days from CNW fans and friends asking for my opinion on how Kanye's business career will do. Everyone is curious as to whether Kanye is still a billionaire.

This week, Kanye's net worth was reduced by $400 million by Forbes. I completely disagree with their methods as always. I'm pressed for time, and of course, everything happens during the one week when I'm essentially unable to write. Therefore, the piece below was developed over several unrelated 20-minute writing sessions which I was able to sneak away and complete. Let's begin.

One can become a billionaire in three different ways.

  • 1) You sell a piece of property, and the proceeds after taxes total more than $1 billion.
  • 2) You have a personal equity ownership position in an asset that is worth more than $1 billion and that is valued in billions of dollars, whether it is a private or public asset. 
  • 3. You receive an inheritance of at least $2 billion and have at least $ billion of dollars left over after paying taxes.

You must have an asset value or bank account balance of at least $1 billion, net of all debts, for any of the three methods to qualify as a billionaire. As an illustration, if you have $1 billion in cash after selling a business (way #1), but you still owe $100 million in mortgages on a Malibu property, your total wealth is only $900 million.

Method #2 was used by Kanye West to become a billionaire. Even after the backlash, the Yeezy brand's private (paper) valuation still accounts for the vast majority of his net worth. After a private estimate of his different personal assets, conducted by the firm UBS, was made public in March 2021, he was formally deemed a billionaire. In March 2021, UBS determined the following valuations for Kanye's possessions and liabilities:

Investments:

  • Real estate holdings equal $120 million.
  • 80 million dollars worth of music, including G.O.O.D. Music
  • Website Yeezy.com = $100 million
  • The Yeezy brand is worth $5 billion.
  • Gap partnership worth $1 billion
  • Equities, cash, and other assets total $400 million.
  • $7.6 billion in total assets

Mortgages make up the majority of the other factors and liabilities, which total $100 million.

Total Assets = $6.6 billion

As you can see, $6.1 billion of his $6.6 billion net worth came from the valuations of his Gap relationship, the Yeezy brand, and the Yeezy website. To put it another way, Kanye would have been valued at about $500 million in March 2021 if those two assets had not existed.

In the past week, Kanye's commercial empire has experienced a lot of change. Actually, it extends back a little bit farther than 72 hours. On September 15, Gap and Kanye cut their relationship off. Kanye goods started being physically removed from Gap and Foot Locker's stores on Tuesday.

In my opinion, the Gap partnership didn't really mean much. When the connection was originally publicized, there were a lot of aspirations and promises, but in the end, it was not very important.

One more thing is Adidas.

Approximately $25 billion in annual income will be produced by Adidas in 2022. Amazingly, Yeezy merchandise will have produced almost exactly 10% of that income. The estimated $2.5 billion in annual sales and $200–$250 million in revenues for Yeezy are as follows.

The most important point:

Ye West is the sole owner of Yeezy.

Photo by Edward Berthelot/GC Images

As a result, when Adidas announces that the agreement will end, Kanye will no longer have a partner for manufacturing and distribution.

Michael Jordan, in contrast, doesn't have any ownership stake in the Jordan company. He is a highly compensated brand spokesperson who receives a very hefty royalty on each sale. Since he does not hold any equity in the company, Michael would receive nothing if Nike discontinued the Jordan brand tomorrow.

Kanye now has two choices following Adidas' withdrawal from the collaboration:

#1) Locate a brand-new, sizable retailer that is eager to take Adidas' place immediately.
#2) Establish himself independently without a significant production and assembly partnership.

The first choice is by far the greatest for Kanye, but can he locate a new business partner who would accept his baggage? Is there a clothing brand out there prepared to put up with Kanye's controversies in exchange for the chance of making an additional couple hundred thousand in earnings per year?

Kanye is moving quickly to research the answers to these concerns.

In the late afternoon on Wednesday, Kanye unexpectedly arrived at the Skechers corporate office in Manhattan Beach, California, ostensibly to negotiate a potential new alliance. After leaving the building, he was escorted:

What effect would Kanye's current controversy(s) have on his brand's annual revenue and profit if he can find a company prepared to accommodate his production and sales? Do decrease in sales by 20%? 30? Absolutely not?

Just so you know, the top eight selling sneakers on StockX over the past 72 hours have seven Yeezy products in them:

So far, it doesn't seem like people are rejecting Kanye. If we take it to mean that demand won't decrease, then Yeezy's value is still very, very high. Accordingly, Kanye's net worth would have still been between $2 and $3 billion on paper if it were to be several billion dollars.

In my opinion, Kanye is still a billionaire even if he is forced to become independent since he can still keep his billionaire position despite the increased challenges.

Let's say Kanye has his own logistics, distribution, and production operations. Let's also assume that his dispute causes revenue and earnings to drop by 50% from prior levels. Still, that would represent a company with annual revenues of $1.25 billion and profits of $125 million. A retail company was valued at 15x its average EBITDA (profit multiple) in 2022. Use 10x to be on the safe side. The Yeezy brand would be valued at $1.25 billion at a $125 million annual profit. Kanye is unquestionably still a billionaire after deducting his liabilities of about $100 million and adding together all of his other assets. Possibly worth $2 billion or more.

Contrary to what I just mentioned, it will be exceedingly challenging to defend Kanye West's continued status as a billionaire if Yeezy does not make a meaningful recovery.