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Msg  418357 of 418581  at  1/11/2019 5:07:03 PM  by

sandgrey


Bezos divorce ramifications for indexes

In Bezos Split, Indexers Weigh a Wonky Question Worth $6 Billion
2019-01-11 15:40:40.617 GMT


By Rachel Evans
(Bloomberg) -- Jeff and MacKenzie Bezos’s split has created
a puzzle for index investors: Who gets their stock in Amazon.com
Inc.?
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.
“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.”
It’s a speculative yet pertinent question, given that about
$3.4 trillion is pegged to the S&P 500, and another $6.5
trillion uses the gauge as a benchmark. That’s put the wonky
methodology governing indexes like the S&P 500 center stage. The
gauge uses a company’s float, rather than the total number of
shares outstanding, to determine its weight in the index, and it
calculates the float by excluding shares owned by the company’s
officers and directors as well as individuals owning 5 percent
or more of a company.
Amazon’s allocation is therefore adjusted down to exclude
Jeff Bezos’s 16 percent stake. If MacKenzie Bezos walks away
from the marriage with 24 million of those shares -- just under
S&P’s 5 percent threshold -- Amazon’s float could grow, lifting
the company’s slice of the index and potentially generating an
$6 billion reshuffling of investments from index trackers
needing to bolster their positions.
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.

--With assistance from Brian Welche


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