In­vestors ask how the Be­zos divorce will af­fect Ama­zon

Business a.m. - - TECHNOLOGY & INNOVATION - Busi­ness a.m.

AMA­ZON.COM INC SHARES see­sawed at the week­end as in­vestors ques­tioned how the im­pend­ing divorce of com­pany founder Jeff Be­zos would af­fect his con­trol of the most valu­able com­pany on Wall Street and its am­bi­tious ex­pan­sion plans.

Be­zos, whom Forbes lists as the world’s rich­est per­son, worth an es­ti­mated $136.2 bil­lion, said via Twit­ter on Wed­nes­day that he and his wife of 25 years, MacKen­zie, will divorce. Ama­zon shares were down 0.5 per­cent in af­ter­noon trad­ing on Thurs­day, after gain­ing ear­lier in the ses­sion.

The split throws into ques­tion how the cou­ple will split their for­tune, which in­cludes an ap­prox­i­mately 16 per­cent own­er­ship stake in Ama­zon’s roughly $811.4 bil­lion mar­ket cap­i­tal­iza­tion.

Divorce laws in Wash­ing­ton state, where they live, hold that prop­erty ac­quired dur­ing a mar­riage is gen­er­ally di­vided equally be­tween spouses.

Most an­a­lysts and fund man­agers are largely san- guine and say the divorce will not lead to any sig­nif­i­cant change in the com­pany’s lead­er­ship or its growth prospects.

Prom­i­nent short-seller Doug Kass, how­ever, who runs hedge fund Seabreeze Part­ners, said he sold his stake in Ama­zon on news of the divorce. That was after ini­tially buy­ing a stake in late De­cem­ber and nam­ing Ama­zon among his “best ideas list.”

“Is it pre­ma­ture to ask what hap­pens to Ama­zon when Jeff Be­zos chooses to turn over the day-to-day run­ning of the com­pany he founded?” he said. “His an­nounced divorce gives me pause for thought.”

he cou­ple has mul­ti­ple res­i­dences across the coun­try, so there is a pos­si­bil­ity the divorce could be filed in a state where mar­i­tal prop­erty is not pre­sumed to be di­vided equally.

New York mat­ri­mo­nial lawyer Bernard Clair said in that case a judge would likely de­ter­mine MacKen­zie Be­zos’ share of Ama­zon stock based on her con­tri­bu­tion to her hus­band’s suc­cess, which could in­clude help­ing him make im­por­tant busi­ness de­ci­sions or rais­ing their chil­dren so he could fo­cus on work.

Any trans­fer of Jeff Be­zos’ stock would be sub­ject to U.S. Se­cu­ri­ties and Ex­change Com­mis­sion dis­clo­sure re­quire­ments. As an of­fi­cer and di­rec­tor at the com­pany, Be­zos could be re­quired to file an SEC Form 4 within two busi­ness days of any trans­fer, though for­mer SEC lawyer Broc Ro­manek noted a pro­vi­sion of U.S. se­cu­ri­ties laws ex­empts share trans­fers made pur­suant to a do­mes­tic re­la­tions or­der.

Even if Be­zos were ex­empted from fil­ing a Form 4, he would be re­quired to up­date promptly the record of his Ama­zon hold­ings on file with the SEC if his po­si­tion in the com­pany changed by 1 per­cent or more, said D.C. se­cu­ri­ties lawyer Thomas Gorman. MacKen­zie Be­zos would also need to file a sim­i­lar record if she re­ceived more than 5 per­cent of Ama­zon stock.

Peter Hen­ning, a se­cu­ri­ties law pro­fes­sor at Wayne State Univer­sity, noted that Ama­zon, un­like fel­low tech gi­ants Face­book Inc. and Google Inc, does not give its founder’s shares greater vot­ing rights. If MacKen­zie Be­zos is given a large block of shares, she could have a big say at the com­pany.

Gorman agreed. “She could wind up with some sort of con­trol block, and get her­self a di­rec­tor­ship,” he said. “It de­pends on what she wants to do.”

Any ef­fort to di­lute MacKen­zie Be­zos’ vot­ing rights by cre­at­ing a sep­a­rate class of shares would re­quire a share­holder vote, said Gorman, though he added that he thought such a move un­likely.

“No­body wants to run their divorce through a share­holder meet­ing,” he said.

Robert Bacarella, port­fo­lio man­ager of the Monetta fund, said that while he is not chang­ing his in­vest­ment in Ama­zon, he ex­pects other growth-fo­cused port­fo­lio man­agers may trim their stakes due to con­cerns about the divorce’s im­pact.

“This is such an overo-wned com­pany and this gives them an ex­cuse to say ‘Maybe I’ll trim some back be­cause it adds a new ques­tion mark’,” he said.

Bacarella, how­ever, said he is not con­cerned be­cause even if MacKen­zie Be­zos liq­ui­dated a stake that could be as high as 8 per­cent, there would be no fun­da­men­tal rea­son be­hind the sale. Any im­pact would be short-term in na­ture.

“Un­less you worry that he will get so dis­tracted by the divorce that he can­not man­age the com­pany, this will be a non-event,” said Michael Pachter, an an­a­lyst at Wed­bush Se­cu­ri­ties in Los An­ge­les. “He is given con­trol of the com­pany be­cause share­hold­ers like him and his vi­sion, not be­cause he has 50 per­cent of the stock.”

Divorce laws in Wash­ing­ton state, where they live, hold that prop­erty ac­quired dur­ing a mar­riage is gen­er­ally di­vided equally be­tween spouses

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