In the Bezos split, index investors weigh a wonky $8 billion question

“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.”

The retail behemoth is also giant on the sharemarket: Amazon’s share price and trading volumes over the past 12 months.Credit:Bloomberg

It’s a speculative yet pertinent question, given that about $US3.4 trillion in investments are pegged to the S&P 500, and another $US6.5 trillion uses the gauge as a benchmark.

That’s put the wonky methodology governing indexes like the S&P 500 centre stage.

The gauge uses a company’s market value and its free float (the number of shares available for trading) 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 per cent or more of a company.

Amazon’s allocation is therefore adjusted down to exclude Jeff Bezos’s 16 per cent stake.


If MacKenzie Bezos walks away from the marriage with 24 million of those shares — just under S&P’s 5 per cent threshold — Amazon’s free float could grow, lifting the company’s slice of the index and potentially generating an $US6 billion ($8.3 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.


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