Company Shares Explained: How Bezos Controls Amazon With 12% Shares

Updated : Jan 11, 2020 in Articles

Company Shares Explained: How Bezos Controls Amazon With 12% Shares


It’s [inaudible]. It’s just
important to think about, cause when people used to come when I
was practicing law and they’re like, I have to own 51%, and I was like, you can actually control the
company without owning 51%. One thing that that’s good to think about
because a lot of folks feel like, uh, it’s really important to own 100% of
the company or a 51% ownership of the company. And if they don’t that,
that they’re really in a bad place. But [inaudible] if you look at a
few people, uh, Jeff Bezos, uh, this is his post divorce settlement
of $35 billion net worth. Uh, so he was able to shed 35
billion of net worth, but, uh, and only owns 12% of the company.
Now his ex wife owns four. Um, but he’s still worth the
110 billion with 12%. Right? So Warren buffet, 86 billion, he only owns 38% combined a and
B shares of Berkshire bill Gates, 105 billion, 1.3% of Microsoft.
So as you go through, Phil Knight is Nike $32 billion, 19% of Nike and then CSEC at 70
billion with 28% of Facebook. So, um, none of those are 51% interests. All of those are people
who are wildly wealthy. They’ve got successful companies. But, but those same things apply down the
line with just smaller numbers. So, you know, divide by a hundred
if you want and say, you know, you’re only at 1 billion.
And um, yeah, it’s, it’s uh, it’s just
important to think about, cause when people used to come when I
was practicing law and they were like, I have to own 51%, and I was like, you can actually control the
company without owning 51%. Um, but if you need the capital or you’ve
got other people that it makes sense to have as equity owners, then you don’t
really have to have that percent. And as far as strategies. So
what’s really cool is, um, so Bezos is a good example.
Their settlement that they
just did his 16 point, whatever percent, uh, is still controlled by him through a
proxy and a proxy agreement with his wife. It was an era, it’s called a
proxy coupled with an interest, which means that I’m going to give you
this ownership interest in the stock shares and that’s considered the interest
and you’re going to agree that they’re in a voting trust and I have the right
to vote them as long as you own them. So that’s just a proxy.
That’s one way to do it. Another way to do it is Warren
buffet has two classes of shares. He’s got class a and class B class a
shares have 200 times the voting power of the class B shares. So he’s able to stay in control
even though he doesn’t have it. Gates didn’t have any strategy
like that at all. He’s done fine. It’s just straight common
stock and that’s okay too. Um, and Phil Knight and I think Phil Knight,
I’ve got cautionary tales after this, but Phil Knight, uh,
when he was going public, how many of you have read shoe dog?
Yeah. Shoe dog is a, is a great read. Um, or listen, if you, if you don’t get a
chance, if you, if you get a chance, how many of you read black, stretchy
little black stretchy pants? [inaudible] little black
stretchy pants is, um, uh, chip, I think it’s chip Wilson who
founded Lulu lemon. It’s his story. And what’s awesome is that the
S the difference in the stories. If you read shoe dog and little
black stretchy pants consecutively, then you’ll see how one
person did it right? And one person did it wrong and it
wasn’t, I think because of Wilson’s, you know, uh, being a bad guy,
I think he got bad advice. But what’s interesting about
Nike is if you read that book, Phil was in the process of going
public. He never wanted to go public. He held on as long as he possibly
could and then he needed the capital. And it was always, as we
as entrepreneurs know, especially in an inventory based business, it was always like on the brink of
disaster, even though it was world famous. All the best athletes and you know,
uh, ridiculous amounts of sales. But, um, he ultimately needed to go public
and they were negotiating it and he said, I’m not going to do it because I don’t
want to lose control and risk being thrown out and my vision isn’t
able to be realized. And they said, well then just do a
different classes of shares. So they set up two classes of shares
and ultimately I think it was kind of brings many, because they went right down to the
public offering and he wasn’t going to do it. And they finally said, you can do
these two classes of shares. And he said, okay. And initially I think the people who
were taking him public in the syndicate said no. And he said, well then I’m
not going public. And they were like, hang on. And then they said,
okay, and, and, and you know, it all worked out. So his deal is that the class a shares
can elect nine of 12 members of the board of directors. And so that’s another
way that you can do it with basically. So there’s preferential saying I can
cast 200 votes, or you can simply say, we’re going to have a board of directors.
It’s going to consist of nine people. It’s never going to be modified
unless I agreed to that. And I get to elect nine out of 12 of
them are 75% so he controls the 75% majority. If the board doesn’t
do what he wants them to do, he simply fires the people that are on
the board and ALEKS people that will do what he wants to do. And then, uh, Zuckerberg has his shares,
two classes of stock. Again, his shares have 10 times voting. So
his ownership interest is actually, I think it works out to be like
73% control of the company. So even though he owns less than
51%, he’s still able to control. So the thing to take away is there’s
all kinds of ways that you can go about having fewer than 51% of the
shares and still control.

Leave a Reply

Your email address will not be published. Required fields are marked *