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MacKenzie Bezos, right, will be one of the biggest individual shareholders in Amazon after her divorce from Jeff Bezos.
- MacKenzie Bezos likely won't sell off a significant portion of her newly independent stake in Amazon anytime soon, legal experts said.
- Following her impending divorce from Amazon CEO Jeff Bezos, MacKenzie will hold 4% of the company's outstanding shares on her own - a stake worth $35.7 billion.
- That raises the possibility that MacKenzie Bezos could try to liquidate her assets by selling much or all of her Amazon stake.
- However, some practical and potential legal considerations will limit her ability to sell off sizeable portions of that stake in big chunks, the experts said.
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Don't expect MacKenzie Bezos to go on a selling spree after her divorce from Amazon CEO Jeff Bezos is finalized.
Nearly all of MacKenzie's newly independent wealth will be likely be tied up in the Amazon shares she will get as part of the divorce settlement, making her one of the comapny's largest individual shareholders. A regulatory document Amazon filed concerning the divorce agreement with the Securities and Exchange Commission indicates that the settlement itself places no restrictions on her ability to sell her shares in the open market.
This could, in theory, have some serious ramifications for Amazon investors: While MacKenzie Bezos is granting Jeff Bezos voting control over her block of Amazon stock as part of the divorce agreement, it raises the possibility that she could try to sell off her stake in a move to liquidate her assets - a manuever that would almost certainly have an adverse affect on the stock price.
But practical considerations and potentially some legal limits will likely prevent or discourage her from selling off her stake in huge chunks, securities law experts told Business Insider.
One practical consideration is the sheer size of MacKenzie's stake. After a Washington court finalizes her divorce from Jeff, which should happen in about three months, she will hold around 19.7 million shares of Amazon's stock, or around 4% of its outstanding stock - an allotment that's worth around $35.7 billion.
But MacKenzie could easily undercut the value of her shares and any amount she saw from selling them were she to sell off a sizeable portion. About 5 million shares of Amazon are bought and sold daily. Even if she sold just 5% of her stake, that would involve moving nearly a millions shares, or about 20% of that daily volume. Such an uptick could overwhelm demand for the shares and send Amazon's share price downward.
Public perception will be a problem for MacKenzie
Another thing she'll have to consider before selling any sizeable stake is the signal that might send to the market. Post-divorce, MacKenzie almost certainly won't be legally considered an insider at Amazon any more. But any trade on her part, particularly any that happen soon after the divorce, is likely to trigger concerns among investors about the reasoning behind it.
"The public will question whether her sales are motivated by insider information," said Mercer Bullard, a securities law professor at the University of Mississippi School of Law. He continued: "Perception will be a problem. Her actions may be market moving for the wrong reasons."
"If she does plan to sell off a significant portion of her shares, MacKenzie would be wise to set up a planned trading program along the lines of those that corporate executives use to immunize themselves from charges of insider trading," he said. Such plans usually are configured to sell off set numbers of shares on a regular basis regardless of a company's stock price or its recent financial results.
"The way to keep her actions out of the negative limelight is to be as transparent as possible," Bullard said.
The SEC could consider her to be in league with Jeff
Legal restrictions may also limit her ability to sell off large portions of her stake at once, experts said.
When it comes to public reporting requirements and trading limits, securities regulations generally focus on large shareholders and corporate insiders. At first glance, such rules wouldn't appear to apply to MacKenzie Bezos. She doesn't have a position at the company, and her individual stake in Amazon will be below the 5% threshold the SEC sets for when shareholders have to report their stakes in a company and what they're doing with their shares.
But the calculus may change because she's getting her shares from Jeff Bezos, who is an insider, and because, as part of the divorce settlement, she agreed to let him vote her shares. Because of that voting agreement - and the fact that Jeff Bezos will hold 12% of Amazon's shares after the divorce - the SEC may deem her to be part of a shareholder group that controls more than 5% of the company's stock, securities lawyers said. If so, she may have to publicly file regular updates on the size of her stake. She may also have to disclose each and every trade she makes in Amazon's stock.
Read this: Jeff Bezos' divorce won't affect his voting power at Amazon, because MacKenzie is giving him control
"She won't have enough stock on her own," said Paul Fasciano, a partner at Sadis & Goldberg. "But if she's considered to be part of group then, yes," she'll have to report her holdings and trades.
She may have legal limits on her trades
Amazon spokeswoman Halle Gordon declined to comment on whether MacKenzie will be subject to any reporting requirements or trading limits.
And yet another set of regulations may come into play when it concerns MacKenzie's holdings - the SEC's Rule 144, which governs certain kinds of stock transactions involving insiders. Because she will be getting the shares in a private transaction from an insider at the company, the SEC may consider her shares to be restricted, securities lawyers said. Such a designation could require her to hold the shares for six months or even a year before selling any of them.
Additionally, because of the voting agreement she struck with Jeff Bezos, the SEC may consider her to be essentially an affiliate of the company. Such a designation would limit her to selling in any three-month period to either a 1% stake in the company or 1% of the average weekly trading volume, whichever is greater.
"She may have 144 restrictions," Fasciano said.
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- Read more about the Bezoses divorce:
- Jeff Bezos and MacKenzie Bezos have finalized their divorce agreement, and he's getting 75% of the Amazon shares and voting control of the rest
- A look inside the marriage of the richest couple in history, Jeff and MacKenzie Bezos - who met at work, were engaged in 3 months, and got divorced after 25 years together
- Jeff and MacKenzie Bezos have finalized the terms of their divorce - and she's set to come out of it as one of the richest women in the world
- Wannabe suitors are flooding MacKenzie Bezos with creepy messages now that she's poised to become one of the world's richest women after her divorce