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Single Stage FCFF Model to Equity Valuation
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Intermediaries to a Credit Card Transaction
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In April 2019, the stock price of Amazon had taken a beating because of the news of the divorce of its billionaire founder. Jeff Bezos, the charismatic billionaire founder of the company, was reportedly involved in an illicit romantic relationship with an acquaintance. When the news of this relationship reached Jeff’s wife Mackenzie Bezos, she filed for divorce. As soon as this news became public, the future of Amazon as a company immediately came into question.
The Bezos shares in Amazon were valued at $143 billion. Jeff and Mackenzie had a combined stake in this company. If this divorce turned out to be an ugly legal battle, then the future of one of the most iconic American companies could be jeopardized. The future of the company, as well as thousands of shareholders, lay in the hands of this power couple.
Jeff and Mackenzie have shown remarkable maturity while coming up with the terms of this divorce deal. Unlike many other celebrity divorces, this divorce did not turn out to be an ugly legal battle which would make it fodder for the tabloid gossip.
Both Jeff and Mackenzie have been able to work out their settlement amicably behind closed doors. The final details of the settlement were announced on Twitter by both Jeff and Mackenzie who claimed to be grateful for their 26-year-old marriage and looking forward to the future.
This deal was well received by Wall Street as investors cheered the responsible decisions made by the power couple.
The headline of this divorce settlement is that Jeff Bezos still retains control of the Amazon stock. Despite this fact, Mackenzie does not seem to have been slighted. She will receive $36 billion in the divorce settlement which will make her the 3rd wealthiest woman in the world. By any measures conceivable, this is still the largest divorce deal in world history. However, it has not been as dramatic as the analysts and paparazzi had predicted.
The biggest news here is that Mackenzie did not try to hold Jeff at ransom as predicted by some analysts. Jeff’s post-divorce net worth will still be over $100 billion, and he will continue to be the richest man in the world according to Forbes.
Most of the money received by Mackenzie Bezos will be denominated in Amazon stock. She will retain approximately 4% of the company’s stock which is currently valued at $36 billion. However, Mackenzie has given up on the voting rights of the company.
Mackenzie is free to sell her shares whenever she wants to. However, these shares will not have any voting rights. If the buyer of these shares wants to obtain voting rights, they will have to enter into an agreement with Jeff Bezos to obtain the same.
As soon as Amazon claimed in an SEC filing that Jeff Bezos will retain control over the company, the anxious Amazon investors were overjoyed.
Ever since the question of the Bezos divorce was raised, voting rights were always the main topic of deliberation. This is because Amazon is a company with a large free float. About 67% of the company’s shares are publicly traded. This meant that if Jeff Bezos lost more shares to a predatory third party under the pretext of a divorce, there was a slight chance that he could be ousted from the company’s board and Amazon could become a target for a hostile takeover.
The shareholders of Amazon have always held Jeff Bezos in high regard. According to them, Bezos is a maverick who has morphed this small online book store into the retail giant that it is today. Any change in the leadership of Amazon was likely to be negatively viewed by the shareholders. This is the reason why Jeff’s continued control over Amazon is vital to the shareholders.
A lot of analysts were bearish on Amazon because they thought that the company would be drawn into long protracted board room battles.
Since the company operates in a hyper-competitive environment, it needs to be extremely focused on growth. If it fails to do so, it may lose its edge. Analysts had expected Jeff Bezos to be distracted by long drawn legal battles focused on protecting his wealth. Instead, the maverick founder has reached an amicable deal meaning that his personal focus, as well as the focus of his company, are no longer in jeopardy.
The bottom line is that the Amazon divorce battle has turned out to be very different from what analysts and commentators had predicted. In fact, it has not been a battle at all.
The biggest divorce settlement in the history of the world has also been one of the most amicable ones. Both Jeff and Mackenzie now plan to focus on their future endeavours. The shareholders of Amazon are overjoyed with the fact that the company that they help built will not be destroyed because of a personal battle.
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