- Amazon could soon have a large new individual shareholder in MacKenzie Bezos as a result of her divorce from her husband, Jeff Bezos, the company’s CEO.
- On Thursday TMZ reported that the couple did not have a prenuptial agreement, citing “sources with direct knowledge” of the situation.
- Jeff Bezos owns 16% of the e-commerce giant, and MacKenzie Bezos could be entitled to up to half of those shares, which would give her one of the two largest stakes in the company.
- Though Jeff Bezos is worth $US137 billion on paper, nearly all of the Bezoses’ assets are in the form of Amazon stock.
- They live in, and are likely to file for divorce in, Washington, a community-property state, which could give her a claim to a sizable portion of their wealth. But it’s unclear exactly how much Amazon stock she’ll end up with.
Jeff Bezos may soon have someone familiar looking over his shoulder when it comes to running Amazon and having a substantial say about it: his soon-to-be ex-wife.
Jeff and MacKenzie Bezos announced Wednesday that they planned to divorce after more than 25 years of marriage.
Because nearly all of his $US137 billion net worth is in the form of his stock in Amazon, it’s highly likely she will end up with a substantial stake in the company as part of any separation agreement.
On Thursday, TMZ reported that the couple did not have a prenuptial agreement, citing “sources with direct knowledge” of the situation.
If that’s the case, there’s a good chance that MacKenzie Bezos could end up having the biggest stake in the company other than Jeff Bezos.
“One would think so,” said Ira Garr, a family-law attorney in New York who represented Rupert Murdoch and Ivana Trump in their respective divorce cases. “I can’t see anywhere else the settlement could come from.”
Jeff Bezos owns about 79 million shares of Amazon’s stock, worth about $US130 billion. The shares give him a 16% stake in the company, making him by far its largest shareholder. The second largest is Vanguard, which had about 6% of Amazon’s shares as of last February.
Should Jeff Bezos have to give half of his shares to MacKenzie Bezos – a not unthinkable outcome, especially if they didn’t have a prenup – her 39 million or so shares would give her an 8% stake in the company and vault her over Vanguard.
Though she could opt for cash instead – which would force Jeff Bezos to sell off tens of millions of shares – or immediately turn around and sell the shares herself, it’s likely she’ll choose to hold on to her shares instead, legal experts said.
If MacKenzie Bezos chose to sell – or forced Jeff Bezos to – “the stock would go way down,” Garr said.
MacKenzie Bezos is likely to benefit from Washington state law
The reasons MacKenzie Bezos could end up with such a huge stake in Amazon have a lot do with where the Bezoses’ divorce proceedings are likely to occur.
Though the Bezoses have dwellings in different areas of the country, they’re likely to file for divorce in Washington state, legal experts said. They have a home in the Seattle area, where Amazon has its headquarters, and have lived there for most of their marriage, said Deirdre Bowen, an associate professor of law at Seattle University’s School of Law.
“Washington seems to be the most logical place” for the divorce proceedings, Bowen said.
That’s important, because it would mean that Washington law would govern the dissolution of the Bezoses’ marriage.
Washington is a community-property state; generally, assets acquired during a marriage are considered jointly held by the two parties. In the case of a divorce, those community assets have to be divvied up between the spouses.
Community-property law works a little bit differently in Washington than in other parts of the country. Unlike states such as California, Washington doesn’t require community assets to be divided evenly between the parties, legal experts noted.
But in the Bezoses’ case, where the two have been married for a long time and the founding of Amazon took place after they got married, it’s likely that’s where a court would end up, said James Spencer, an adjunct professor at Seattle University’s law school and an attorney with Brothers & Henderson.
“Considering the totality of the circumstances (as are publicly known), I think it more likely than not that a court would divide the stock roughly in half,” Spencer said.
Jeff and MacKenzie Bezos will most likely settle out of court
Legal experts such as Spencer, though, don’t expect the Bezoses’ case to end up being decided by a judge. Instead, they expect the two to reach a settlement out of court, whether through negotiations between themselves or among their lawyers, or through arbitration proceedings. So Washington’s community-property law may not have a direct effect on the divorce’s outcome.
But it’s likely that MacKenzie Bezos will use it – and the assumption that she should get half of the couple’s community assets – as a starting point for negotiations, Bowen said.
“She can go in and tell her attorney … to work with the assumption that it’s going to be 50-50,” she said.
To be sure, MacKenzie Bezos could end up with a far smaller stake in Amazon than half of Jeff Bezos’ current holdings. If they signed a prenup or a postnuptial agreement, for example, such a contract could severely limit her claims on his shares of the company.
Amazon representatives did not respond to an email inquiry about whether the Bezoses had such an agreement, but TMZ reported on Thursday that the couple had not.
They could fight over what she’s entitled to
Another complicating factor is how negotiators for the two parties – and potentially an arbiter or a judge – classify Jeff Bezos’ stock holdings. Though assets acquired in marriage or the amount by which they appreciate are generally considered community property, courts can make a distinction between passive and active appreciation of assets, Bowen said.
Jeff Bezos could argue that the massive increase in the value of his Amazon stock was largely due to his personal active management of the company and had nothing to do with MacKenzie Bezos. Should he take that stance and have it affirmed by a judge or an arbiter, MacKenzie Bezos could end up with a much smaller stake in Amazon than she might otherwise.
He could argue his Amazon stake “should remain mine,” Bowen said.
The outcome of the case also will hinge in large part on Jeff’s and MacKenzie’s mental and emotional states going into it. In their joint statement announcing the divorce, the two portrayed their parting as amicable. But late Wednesday, reports in the New York Post and the National Enquirer charged that Jeff Bezos had been having an affair with Lauren Sanchez, a former TV anchor, which could indicate their separation wasn’t all that friendly.
If there’s rancor involved, it could have a major effect on what each party will demand and settle for, Bowen said.
“The wild card here is I don’t know the psychology each party has going into this divorce,” Bowen said.
MacKenzie Bezos could end up demanding a large cash payout, she said.
“I don’t think she’s an unreasonable person, so I don’t see that happening,” Bowen said. But, she added, MacKenzie Bezos could say in the proceedings something like: “Why would I want Amazon stock when you’re controlling it? I want you removed from my life.”
And there’s another potential wrinkle. Amazon’s board and Jeff Bezos may be uncomfortable and unwilling to hand over that much of the company’s stock to MacKenzie Bezos, particularly if the two are at odds. He or the board may push to limit her ownership, either by having Jeff Bezos sell shares and give her stake in cash or by giving her other assets, such as his ownership of The Washington Post or his rocket company, Blue Origin, instead.
“With someone who is as closely associated to his brand as Jeff Bezos, it may be that he will refuse a settlement that gives his ex-wife that much Amazon corporate power,” said Terry Price, a family law professor at the University of Washington’s School of Law.
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