It might seem counterintuitive to laymen, but the Bezos’ divorce – and the equitable division of assets that is likely to ensue – may end up boosting Amazon’s share price, particularly if Jeff and MacKenzie are forced to liquidate some of what is currently a 16% stake in the e-commerce behemoth.
That’s because – as Bloomberg explains – if the couple must sell shares as part of their divorce, then those shares will join Amazon’s free float. That would in turn boost Amazon’s weighing in indexes like the S&P 500.
If that happens, index-fund managers will need to buy more Amazon shares to account for this change.
Regulatory filings show Jeff Bezos owns almost 79 million shares of the company, worth about $130 billion as of yesterday. If MacKenzie takes a chunk in a settlement – or either party needs to liquidate their assets to meet divorce expenses – those could become part of the company’s freely traded stock. In turn, that could boost the company’s weighting in indexes including the S&P 500 – sending tracker funds on a small Amazon shopping spree.
Considering that Amazon is one of the most liquid stocks traded in the US, it’s unlikely that any selling by the Bezos’ would have much of an impact on the share price. But it could hurt other stocks as index managers liquidate other holdings to buy Amazon.
“From the perspective of the index, you’d need to a sell a little of everything else and buy some Amazon,” said David Dziekanski, a portfolio manager at Toroso Investments. “The equity markets will absorb any Amazon additional shares without much impact on price.”
Amazon, which is the world’s most valuable publicly traded company, has a market cap of just over $800 billion. Compare that with $3.4 trillion pegged to the S&P 500, and another $6.5 trillion use the gauge as a benchmark. Indexes typically use a company’s available float – rather than the number of shares outstanding – to determine weighting (this measure excludes shares owned by the company’s officers).
But S&P methodology also excludes shares owned by “related individuals” of company officers and directors from its float calculation. The index provider declined to comment on whether that category would include ex-spouses, with a spokeswoman adding that the firm doesn’t typically comment on individual companies. More simply, the float could grow if either Bezos sells shares to raise cash. Because let’s face it, even Amazon can’t make divorces cheap.
And since MacKenzie Bezos didn’t sign a prenup, it looks like some of the stock will likely be sold as assets are divided and taxes are paid.
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