Kim And Kanye Finally Split: Where Does $2 Billion End Up

Division of assets will be relatively straightforward. The big questions revolve around custody rights and how much the Kardashian-West empire is really worth.

After six years of marriage to Kanye West and months of rumors, Kim Kardashian has pulled the plug. Evidently there’s no fresh drama. They’re just estranged and looking to move on.

Negotiations are apparently going smoothly. That’s to be expected. The hard part was done years ago.

Both partners insisted on prenuptial agreements. It was his first wedding and her third. At the time, they were maybe worth $100 million together.

Now their reported net worth has exploded to $2 billion if you look at it right. They’ve both branched out into branded businesses, leveraging their celebrity into shoes, cosmetics and more.

However, a prenup is a prenup. Unless something bizarre happened inside the paperwork, the businesses she stared before the marriage remain hers after the split.

In theory, he could make a claim that any marital cash she poured into her lipstick company entitle him to continued participation. But it’s more likely that the argument would go the other way.

Kanye borrowed heavily to fund his shoe venture. Most of the seed cash came in before the marriage, but one check written on the wrong account would create big problems.

All in all, mingled money probably played a minimal role (if any) on either side. Let’s assume she keeps KKW and he keeps Yeezy.

They’ll need to sell or split the houses, art and other joint property. Beyond that, it’s just a matter of determining where their four young kids live and how their upkeep will be funded.

Kim is evidently happy keeping them. Kanye is evidently happy to take them. The publicists say it’s unlikely to get ugly.

But Are The Numbers Inflated?

Where it gets ugly is if the net worth numbers circulating fail to provide an accurate picture of the Kardashian-West financial situation.

Kanye went into the relationship with a rumored $90 million to his name. At the time, he was struggling to fund his shoe company and outside investment never really materialized.

He persevered. The venture evolved from niche fashion toy to mass-market distribution and now Forbes says it’s doing $1.3 billion a year in sales.

I haven’t seen any evidence on that number but the people at Forbes are experts at what they do. Where it gets interesting is that Kanye owns the company outright and gets paid off the top.

He doesn’t worry about making the business profitable, which might be one reason outside investors never made him an offer he can’t refuse. Instead, he gets an 11% royalty on every pair of shoes the company sells.

That’s a nice pool of cash if you’re tracking sales into the billions. As long as the brand flourishes, you keep making money. If the brand deteriorates, you just make less.

The problem is that I get the sense he’ll try to insulate the royalty interest from whatever exit he might make from the company itself.

Normally, a shoe company like his current distribution partner Adidas would want to buy its way into an up-and-coming rival brand to shore up its global market share. Under the right conditions, the entire company could be up for sale.

Here, however, the royalty is a poison pill. Adidas only captures a 2% net profit as it is. Carving another 11% away from that proposition would make Yeezy become a drag on the bottom line and not a boost.

Who wants that? Would Kanye be amenable to selling the royalty and keeping some form of participation in the company itself? Again, I don’t think that’s his goal here.

But I could be wrong. Until we see evidence to the contrary, I don’t think the company has any strategic value whatsoever. It’s a great annuity but the operation itself isn’t transferrable.

As with all illiquid assets, we can speculate about what it’s worth and have outside experts do the forensic math. All the numbers are hypothetical until either Kanye dies or finds a buyer.

Is he worth $1 billion? Unlike Elon Musk, who is also spending personal funds to expand his business and support his lifestyle, he doesn’t have a public stock to use as a currency.

The Kardashian Mystique

Kim’s numbers are similarly dubious. There’s a funny detail on her Wikipedia page:

“As of July 2018, Kardashian is worth US$350 million. Combined with husband Kanye West’s net worth of $1.3 billion, their total household net worth is an estimated $510 million.”

Do the math. Kim reportedly had $350 million at the time. Kanye reportedly had $1.3 billion. Add the two numbers and that’s . . . $510 million?

Nobody caught this. Reporting about this family rarely obeys normal accounting standards.

For example, when matriarch Kris Jenner signs a multi-year contract, the gross number is often assigned to each family member and then multiplied to add to the previous net worth estimate.

Needless to say, important factors like debt and spending get lost here. With Kim, the “personal balance sheet” is both more public and more fragile.

For one thing, the valuation on her cosmetics company is based on a trailing transaction that Wall Street has decided was extremely overpriced.

Coty paid $200 million in June for 20% of Kim’s company, implying a $1 billion valuation. Great, right? Kim theoretically still has a $800 million stake.

But Coty has been known to make gross errors on acquisitions. They could have offered up to $200 billion, but that wouldn’t make this a $1 trillion enterprise.

Forbes had to cut Kim’s sister Kylie from its billionaire list because they discovered she gave the world bad numbers.

Coty evidently believed the hype because they bought half of Kylie’s cosmetics line for $600 million. It turned out that sales were tracking barely 1/3 of what they’d been led to believe.

Evidently Forbes made a mistake as well. The Kardashians have a track record of inflating themselves. Don’t get me wrong. They’re legitimately rich.

But the way most true billionaires happen is through convincing outside investors to fund your idea and then cashing out via a public offering. At that point, your holdings are liquid.

The TV show is over. The Kardashians and the Jenners are no longer getting paid. Whatever money they make is their own hustle.

Is that part of what’s going on in this divorce? Is there no financial reason to perpetuate the drama now that there’s no way to monetize it?

Maybe we’ll find out some day. For now, no matter where the numbers go, let’s hope the negotiations go smoothly and the kids are happy wherever they end up.

The pandemic was a strain on a lot of marriages. There's more of this to come.


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