At the end of last month Gap (NYSE:GPS) announced a surprising partnership with Kanye West, announcing the YEEZY Gap line, in which Gap will sell his YEEZY brand at Gap's stores and through its website beginning in 2021.
The partnership is reportedly for ten years and can see YEEZY receive royalties and equity in Gap depending on sales. Gap issued YEEZY Supply warrants for up to 8.5 million shares, according to a filing with the U.S. Securities and Exchange Commission. Given the sales targets laid out by Gap, YEEZY Supply could end up owning a 2% stake in Gap if they're hit.
"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," Global Head of Gap Brand Mark Breitbard said.
Investors were thrilled with the announcement by Gap—which saw first quarter sales drop by 50%, as the stock soared by as much as 40%. The company added more than $700 million to its market capitalization following the announcement as shares ended up closing nearly 20% higher.
With not even a month having gone by since the announcement, it seems West may be inclined to walk away from the partnership altogether. Speaking at his first 2020 presidential campaign rally in South Carolina this past weekend, West threatened to pull out of the partnership with Gap if he isn't given a seat on the company's board of directors.
West also issued the same threat to Adidas (OTC:ADDYY), which produces the popular YEEZY brand sneakers.
"In risk or no risk of losing whatever deal possible, I am not on the board at Adidas," West said.
"I am not on the board at GAP and that has to change today or I walk away."
Gap shares instantly took a hit on Monday following West's comments over the weekend, as shares fell more than 7%. Shares of Gap now sit nearly 12% below the high from the day the partnership was announced.
The timing of West's remarks are questionable, given he shared a sneak peak of the YEEZY Gap line for the first time just a few days earlier.
Where the partnership between Gap and YEEZY goes from here is anyone's guess. With the sneaker business of YEEZY valued at about $3 billion with $1.3 billion in sales last year, Kanye may be thinking Gap needs him more than he needs them.
If the partnership falls through, perhaps YEEZY could end up a publicly-traded company through the increasingly popular method of going public via a deal with a special-purpose acquisition company, or SPAC.