Amazon founder Jeff Bezos’ surprising divorce raises the question of how his 16% stake in the $800 billion company will shrink, in order to fund the settlement with his soon-to-be ex-wife, MacKenzie. It doesn’t look like there’s a prenuptial agreement in place and she’s been around for all of Amazon’s success.
Wealth Advisor explains in the recent article, “Amazon Achilles Heel: Bezos Prenup Disaster Threatens $800B Behemoth,” that, in Washington State, MacKenzie can anticipate getting half of the community property.
That may be a challenge, when the majority of that wealth is in his $126 billion in stock. Jeff can give her close to 40 million shares and a few of their houses and call it good, but there can be problems with that arrangement, too.
MacKenzie could get half the stock in exchange for giving up the voting rights and the right to sell. This would effectively lock her in as a silent partner, shoring up Jeff’s continued control. Amazon could give her a prestigious but non-executive role on the board. She would certainly be a candidate to serve as director, with her 8% of the stock.
MacKenzie needs a way to liquidate whatever shares she gets, because Amazon doesn’t pay dividends and is unlikely to do so for the foreseeable future.
There’s no simple way to turn that asset into current cash flow, short of selling some stock. In fact, that’s what Jeff does now: he’s been selling a bit of his to fund other investments and the family lifestyle, in addition to paving the way for philanthropic ventures.
MacKenzie will need the same authority in her divorce settlement, or she’s still going to need cash. At some point, a judge may allow her to sell $60 billion in stock.
The goal now is making sure that Jeff keeps control of the company. That should have been the plan years ago. Amazon doesn’t have a real succession plan. There’s no trust holding the stock safe for future generations. The company doesn’t even carry life insurance on him. As a result, they are all subject to his mortal frailty. Divorce hit before death or disease, but it was only a matter of time.
It’s a big lesson: Jeff Bezos never guaranteed that Amazon would continue on its path without him.
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Reference: Wealth Advisor (January 14, 2019) “Amazon Achilles Heel: Bezos Prenup Disaster Threatens $800B Behemoth”
Suggested Key Terms: Estate Planning, Divorce, Pre-nuptial Agreement, Business Succession Planning, Life Insurance