Bezos' Divorce Could Boost Amazon's Share Price

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.

Bezos

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).

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Mark Borkowski 4 months ago Contributor's comment

I have not agreed with Mr. Tyler Durden's on every occasion. This time he is right on the money and has provided the market with some very wise advice. His column, "Bezos' Divorce Could Boost Amazon's Share Price" provides good insight. It is reported that the Bezo's do not have any prenuptial agreements. An amazing transfer of wealth will take place. Some pundits today predicted that Amazon might even become a takeover target by a consortium of private equity funds. Who knows?

Index Managers will likely buy more Amazon stock and give them an opportunity to sell some other positions. Durden is correct in stating that Indexes typically use a company's available float - rather than the number of shares outstanding - to determine to weighting (this measure excludes shares owned by the company's officers). No doubt that as Index Managers load up on Amazon, they will likely sell some of their other less attractive holdings. If this happens, the S&P will likely drop. Stay tuned.