Jeff Bezos' impending divorce carries some big risks for Amazon shareholders (AMZN)

jeff bezos mackenzie bezos

  • Amazon CEO
    Jeff Bezos’ impending divorce from his wife, MacKenzie Bezos,
    carries at least two big risks for the company’s shareholders,
    legal experts say.
  • Bezos could become distracted by the divorce proceedings,
    affecting his ability to run Amazon.
  • The divorce could also potentially lead to a mass sell-off of
    stock by either Bezos or his wife.
  • Legal experts think Bezos and his wife will work to minimize
    those risks, since it’s in their interests to do so.
  • But divorces don’t always go smoothly, and things could end up
    worse than they expect.

For the last 25 years, Jeff Bezos has been the steady hand on
the tiller for Amazon, guiding the company through both rough
patches and calm seas to ever-richer ports of call.

Now his personal life threatens to rock the company’s boat.

Bezos
announced Wednesday that he and his wife, MacKenzie, are getting a
divorce
. Investors will likely be watching closely to see how
the dissolution of his marriage affects Bezos’ running of the
company and his stock holdings in it, said Mark Harrison, an
advisor with consultancy Marcum, who has served as an expert
witness in numerous financial disputes.

“Investors care mostly about uncertainty,” he said. He
continued: “The market will look for signs of emotional upheaval
between the two of them.”

For now, investors seem to be taking the news of the divorce in
stride. Amazon’s shares closed Thursday down well less than 1%, and
the company retained its title as the world’s most valuable
corporation. But things could change if the proceedings become
protracted or start to get ugly, Harrison said.

That may already be starting. In a statement on Twitter
announcing their plans to divorce, Bezos and his wife portrayed it
as a friendly parting. But subsequent reports in the National
Enquirer and the New York Post that Bezos
was carrying on an affair before he and his wife officially
separated
threatened to sully that narrative.

The Bezoses’ divorce has two big risks for shareholders

The risk of the Bezoses’ breakup to Amazon and its shareholders
is two-fold.

As the company’s founder and sole CEO since its launch, Bezos is
widely seen as the driving force behind the tech giant, which
dominates the e-commerce market, has become the leading player in
the cloud-computing industry, and has become the number-3 player in
digital advertising behind Google and Facebook. Many investors
likely consider him to be critical to the company’s continued
success, and may rightly worry that Amazon’s business could suffer
if Bezos is distracted by the divorce.

Discussing the potential danger, Harrison paraphrased hedge fund
manager
Paul Tudor Jones’ feelings on the topic
.

Lauren SanchezA person
going through a divorce is “worthless to him, because they’re
completely unfocused,” Harrison said.

But the other danger comes from Bezos’ vast holdings of Amazon
stock. He owns about 79 million shares, or about 16% of the
company. That stake, worth about $131 billion, represents about 95%
of his total wealth.

Washington state, where Amazon is headquartered and the Bezoses
have long made their primary residence, will likely be where they
end up filing for divorce. The state’s community property laws
don’t mandate that MacKenzie will get a 50% cut of his Amazon stake
in the divorce, but
they likely will result in her getting ownership of a sizable
portion of it
, potentially up to half, legal experts said.

Read more:
Jeff Bezos’ divorce could soon make MacKenzie Bezos one of Amazon’s
biggest shareholders

The concern for investors is what kind of control she will have
over the shares she gets, how they get transferred to her, and what
she does with them.

“Investors are going to be spooked if any member of the family
starts selling significant amounts of stock,” Harrison said.

The divorce won’t cause a change of control at Amazon

Amazon representatives did not respond to emails seeking comment
about the Bezoses’ divorce. Representatives for Vanguard and
BlackRock, the two largest Amazon shareholders after Bezos,
declined to comment on the divorce proceedings or their impact on
shareholders.

Mark ZuckerbergOne thing that’s not a
concern in the Bezos divorce is how it will affect control of the
company. Other tech CEOs,
including Facebook’s Mark Zuckerberg
and Alphabet’s Larry Page,
hold shares that give them or a small cohort of insiders control
over their companies because
they come with super-sized voting rights
.

But Bezos holds the same kind of shares as everyday Amazon
investors. Although he’s Amazon’s largest shareholder, its CEO, and
its chairman, he doesn’t have unchecked sway over it. So, no matter
how many shares MacKenzie ends up with, or how her holdings are
structured, it won’t affect the balance of power at the
company. 

“I am very happy that Amazon has a one share, one vote
structure,” said Rosemary Lally, an editor at the Council of
Institutional Investors, which advocates for stronger corporate
governance and shareholder rights, in an email. “If McKenzie [sic]
Bezos does become a major shareholder and tries to do something
that other Amazon shareholders oppose, they can [hold] her
accountable.”

Legal experts expect them to keep shareholders in mind

To be sure, Harrison, who has worked on divorce cases among
other affluent couples, and other legal experts expect the Bezoses
to be very aware of investors’ potential worries and to do whatever
they can to alleviate them. Because so much of their wealth is tied
up in Amazon’s stock, it’s in the best interests of both of them to
do so.

“I think you’re going to find that both parties here want to get
the investor world comfortable that nothing’s going on,” Harrison
said.

Indeed, he and some other legal experts expect the divorce
process to go relatively smoothly, not just because it’s in both
sides’ interest, but because the amount of wealth they have is so
immense. In some divorces, even among wealthy individuals, one side
or the other stands to be materially hurt by the division of their
assets, particularly if most of their wealth is in their homes,
said Ira Garr, a family-law attorney in New York who represented
Rupert Murdoch and Ivana Trump in their respective divorce cases.
Such cases can be particularly rancorous, just because of that.

But that’s just not applicable with the Bezoses.

“When you’re talking about numbers this vast, no matter what you
get, you’re set for the rest of your life,” Garr said. In that
respect, he continued, “cases like that are easier to settle.”

The two will likely structure their divorce settlement so that
they don’t have to sell shares all at once and depress the market,
legal experts said. Instead, they’re likely to put provisions in
place that limit MacKenzie’s ability to sell stock — and perhaps
even allow Jeff Bezos to retain control over the voting rights of
her shares, Harrison said.

Indeed, Brian Weiser, a financial analyst who covers Amazon for
Pivotal Research Group, doesn’t think investors have anything to
worry about when it concerns Bezos’ divorce.

“I’m not aware of any reason why anyone should assume there’s
any meaningful risk of any meaningful problem,” he said.

But emotions can sometimes get in the way

Much of this assumes that the Bezoses will act rationally and
will be able to set their emotions aside. But many divorces don’t
work out that way. And if Bezos or MacKenzie starts acting out of
emotion rather than rationality, all bets may be off in terms of
the ease of the divorce, his state of mind in running Amazon, and
what happens to his shares.

“When [a divorce] gets salacious and a little crazy … all
kinds of bad things can happen,” Harrison said.

SEE ALSO: Amazon
Web Services could be worth $600 billion by itself. Here’s why Wall
Street analysts think a spinoff won’t happen any time
soon.


Join the conversation about this story »

NOW WATCH:
7 science-backed ways to a happier and healthier 2019 that you can
do the first week of the new year

Source: FS – All – Economy – News
Jeff Bezos' impending divorce carries some big risks for Amazon shareholders (AMZN)