The Amazon Divorce
According to Forbes magazine, Jeff Bezos is the wealthiest person in the world. His assets are close to $140 billion which ensure that he is by far the richest person on the planet. Some days earlier, Jeff Bezos has announced his decision to split from Mackenzie Bezos who has been his wife for the past 25 years. Obviously, the personal impact of such a divorce would be profound on the billionaire tech czar.
However, the divorce announcement has also started worrying Amazon shareholders. Many analyst and investors are worried about the grave impact that this divorce could possibly have on the health of Amazon Inc.
In this article, we will have a closer look at the financial effects of the Amazon divorce.
How the Assets are Likely to be Split
In order to understand how Amazons assets will be split, one needs to know that divorce settlements are under the purview of state law. Hence, the state in which the divorce is filed will have a huge impact on the amount of settlement that will have to be paid.
In case of Jeff and Mackenzie Bezos, they have many residential properties all across the United States. This is the reason why it is possible that they could file the divorce in almost any state if both of them agree to do so. However, in case of any difference of opinion, the divorce is likely to be filed in the state of Washington. The state of Washington distinguishes between pre-marital and post-marital property. All post-marital property is divided equitably amongst both parties. In most cases, equitably means equally. Hence, if the divorce is filed under Washington state law, Jeff Bezos is likely to lose more than $65 billion.
However, it needs to be noticed that in many cases, divorces have led to asset splits of 60-40 or even 70-30. It generally depends on a case to case basis. Also, it is unlikely that a judge will have to split the assets. It is more likely that Jeff and Mackenzie will hammer out a deal themselves and then ask the judge to approve it. The fact that Jeff Bezos was cheating may also not be material to the investigation. Usually, the cheating partner has to give half the amount spent on the affair as compensation to the other spouse. Since Jeff and Mackenzie are both certain to be billionaires even after the break-up, this amount would be immaterial.
Control of Amazon: The shareholders of Amazon are not very concerned about the personal wealth of Jeff Bezos. However, they are quite concerned about how Jeff will retain the control of the company that he built from scratch. It needs to be understood that Jeff does not own more than 50% stock in Amazon. Instead, he owns only 16% of the stock now. This means that technically, some else could be put in charge of Amazon right now. However, this has not happened since the shareholders believe in the vision that Jeff Bezos has.
Hence, it is important that after the divorce also, Jeff Bezos must retain control of the company. Giving away half the shares to Mackenzie would mean that half the voting rights would also be split up.
In order to prevent this from happening, there are a couple of things that Jeff Bezos can do.
- He could introduce a tiered share structure at Amazon. This means that Mackenzie would have all the financial benefits that come from owning these shares. However, she would not have any voting rights. Doing this would be legally very complicated. This is because changing the voting rights of a certain class of shares is controversial and needs to be ratified by all the shareholders
- Secondly, Jeff and Mackenzie could avoid splitting their shares altogether. They could instead be kept in a trust which would be jointly controlled by both Jeff and Mackenzie.
It is important to note that shareholders want to ensure that Jeff does not lose control of his company. If he does somehow lose control, the shares of Amazon are likely to drop significantly.
Lower Price: There are also concerns that Mackenzie Bezos might choose to liquidate the shares once she gets hold of them. This would put a lot of Amazon shares in the market at once. The end result would be that the share price of Amazon would be lowered. However, since the fundamentals of Amazon would not have changed, any change in price would be temporary at best. Ideally, the shareholders should not be worried about this. If anything, they would get a chance to buy more Amazon stock at a lower price.
Lengthy Litigation: Lastly, shareholders might also be worried about the possibility of lengthy litigation. If such litigation were to indeed take place, it would take an immense toll on the mental and physical well-being of Jeff Bezos. However, up until now, Jeff and Mackenzie have been mature about handling their differences, and the possibility of prolonged litigation can simply be written off.
To sum it up, Jeff Bezos divorce is unlikely to have a huge impact on the shareholders. Their only fear would be about Jeff losing control of the company. However, that is also unlikely to happen.
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