Jeff Bezos' divorce could soon make MacKenzie Bezos one of Amazon's biggest shareholders
- Amazon could soon have a large new individual shareholder in the form of MacKenzie Bezos as a result of her impending divorce from the company's CEO.
- Jeff Bezos owns 16% of the e-commerce giant, and MacKenzie could be entitled to up to half of those shares, which would giver her, with Jeff, one of the two largest stakes in the company.
- Although the Bezoses are worth $137 billion on paper, nearly all of their assets are in the form of Amazon stock.
- They live in, and will likely file for divorce in, Washington, which is a community-property state, which potentially gives her a claim on a sizeable portion of their wealth.
- Because of the numerous variables in play, 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 substantial say about it - his soon-to-be ex-wife.
Bezos and his wife, MacKenzie, announced Wednesday they plan to divorce after more than 25 years of marriage. Because nearly all of their $137 billion net worth is in the form of his stock in Amazon, it's highly likely that she will end up with a substantial stake in the company as part of any separation agreement. Indeed, there's a good chance that she could end up having the biggest stake in the company other than 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."
Bezos owns about 79 million shares of Amazon's stock, which are worth about $130 billion. The shares give him a 16% stake in the company, making him its largest shareholder by far. The second largest is Vanguard, which had about 6% of Amazon shares as of last February.
Should Bezos have to give half of his shares to MacKenzie - a not-unthinkable outcome - her 39 million or so shares would give her an 8% stake in the company and vault her over Vanguard. Although she could opt for cash instead - which would force 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 she chose to sell - or forced Bezos to - "the stock would go way down," Garr said.
MacKenzie will likely benefit from Washington state law
The reasons why MacKenzie could end up with such a huge stake in Amazon have a lot do with where the Bezos' divorce proceedings are likely to occur.Although the Bezoses have dwellings in different areas of the country, it's likely they'll 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 out most of their marriage there, said Deirdre Bowen, an associate professor of law at Seattle University's law school.
That's important, because it would mean that Washington state law would govern the dissolution of the Bezoses' marriage.
Washington is a community-property state; generally, assets acquired during a marriage are considered to be jointly held by the two parties. In the case of a divorce, those community assets have to be divvied up between the two 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 two parties, legal experts note. 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 School of Law 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.
Bezos and Mackenzie will 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 among themselves or between 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 will use it - and the assumption that she should get half of the couples' 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 could end up with a far smaller stake in Amazon than half of Bezos' current holdings. If they signed a pre- or post-nuptial agreement, for example, such a contract could severely limit her claims on Bezos' shares in the company.
Amazon representatives did not respond to an email inquiry about whether the Bezoses had such an agreement.
Bezos and MacKenzie could fight over what she's entitled to
Another complicating factor is how negotiators for the two parties - and potentially an arbiter or judge - classify Bezos' stock holdings. Although 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.
Bezos could potentially argue that the massive increase in the value of his Amazon stock was due largely to his personal active management of the company and had nothing to do with MacKenzie. Should he take that stance and have it affirmed by a judge or arbiter, MacKenzie 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 the mental and emotional state Bezos and MacKenzie are in 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 Bezos has been having an affair with former TV anchor Lauren Sanchez, 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.
"I don't think she's an unreasonable person, so I don't see that happening," Bowen said. But, she added, MacKenzie 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 Bezos himself may be uncomfortable and unwilling to hand over that much of the company's stock to MacKenzie, particularly if the two are at odds. The board or Bezos may push to limit her ownership, either by having Bezos sell shares and give her her stake in cash or by giving her other assets, such as his ownership of the Washington Post or 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.