Thread by @iamkoshiek

Even Stevie Wonder could see how Forbes got this horribly wrong. Meth instead of math! Is Kanye worth only $1.8bn? Absolutely no chance [Thread]

https://twitter.com/Forbes/status/1372622671553388548

If you say stupid shit like this in an investment bank, they take you down to the print room and shoot you. I'd rather read 50 shades of grey than this pseudo-valuation bullshit. Companies are valued on their FUTURE earnings performance - i.e. tomorrow's earnings performance!

Wait, there's companies with zero revenue & high valuations? Yes! Some even have $1bn+ valuations

Most are SPACs BUT there are single companies with $1bn+ valuations with no revenue

Nikola was valued over $30bn at one point & never sold a one truck. Now at $5bn, still not zero!

Assigning a zero value to Kanye's GAP deal assumes the man will not sell a single shirt across the next 10 years

GAP (as a brand) is at least 25% of the business & is showing strong digital growth

Even at modest assumptions - sales are expected well over $100m in the first year

The Kanye/ GAP deal is one of the smartest deals any celebrity has ever made. Why? He gets a chance to cash in on warrants. Basically he can get to own a stake in GAP for cheap (8.5m shares= 2.3%)

Here's an extract from the SEC on how the ratchet (revenue targets) work for Kanye

Quick stock math

- 50% at issuance (GAP closed at $10.16)
- 50% at $25 (fixed)

If Kanye hits $700m net sales, gets full slug of 8.5m stock (GAP spot price - $30.88)

Kanye pays: 4.25m x $25 + 4.25 x $10.16= $149m
Kanye gets: 8.5m x $30.88= $262m

$113m banked, shout-out Axelrod

Let's run this play forward. What if GAP stock gets up to $50 across the next 10 years?

Kanye pays: $149m
Kanye gets: $425m

Banks a juicy $275m

GAP stock is up since 204% since Kanye received warrants

Tom Ford did a similar stock deal with Gucci ended & up as Vice Chairman

Forbes also fucks up the valuation of Yeezy. First rookie error is using 2020 sales, second more criminal mistake is running sales of a ridiculously low valuation multiple AND then applying a further discount.

Stephen Hawking's legs worked better than this valuation

Running numbers on Yeezy royalties

Kanye gets 15c gross on every $1 in sales on Yeezy kicks. After expenses you're looking 10-11c net. UBS estimates at $1.7bn, Kanye takes home $191m

My calcs have Yeezy royalties roughly $5m lower at $185 net, with a slightly higher expense %

Valuing Yeezy (1)

Yeezys grew 31% last year to $1.7bn, even if you low-ball FY21 y-o-y growth at 12% - you're at $1.9bn

Yeezy EBIT margins are c. 12.5%

Apparel EV/EBITDA multiples are 14.7x -15.0x (shout-out to my homeboy @AswathDamodaran) ++ my trusty old comps model confirms

Valuing Yeezy (2)

Let's run a 20% pvt discount on 14.7x, now at 11.8x
Across last 5yrs D&A as % of EBIT is c.29% (Adidas).

$1.9bn at 12.5% EBIT margin = $238m
Scale up D&A over EBIT to get to FY21 EBITDA: $306m
Apply multiple = $3.6bn

At some modest assumptions: Yeezy = $3.7bn

Yeezy Valuation:

Forbes: $1.5bn
UBS: $3.9bn
KK: $3.7bn

On the Yeezy valuation alone, Forbes undercooks Kanye's net worth by at least $1bn - $1.5bn. By zeroing out the GAP deal, they're excluding the upper end of another $900m.

We don't even need to get into music royalties...

Forbes went out & declared Kylie Jenner a billionaire off unaudited, unverified, financial statements. AFTER announcing her as a billionaire, Forbes realized their rookie mistakes & threw her under the bus

....yet here we are, using fucking ridiculous numbers on Kanye?!

Forbes is no stranger to publishing dodgy net worth numbers, running guesstimates & then trying to buy back credibility through long think pieces.

Seems like the media will still tell you something... even after you get your money right

Additional Read #1: The Kylie // Forbes Sham

https://twitter.com/iamkoshiek/status/1266426138739474432?s=20

Additional Read #2: How net worth works

https://twitter.com/iamkoshiek/status/1253996357939081216?s=20

@Forbes your rookie journalists must be college dropouts, if you ever want to graduate from the school of valuation - come get some smoke

Shout-out for making it to the end!