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Why does he selp stock to fund Blue Origin instead of taking out debt backed by shares? If the past is any indication, such debt would make way more financial s
by mruts 7y ago
Why does he selp stock to fund Blue Origin instead of taking out debt backed by shares? If the past is any indication, such debt would make way more financial sense than selling shares.
I don’t know how long he’s been doing this, but he’s leaving billions of dollars of returns on the table.
And don’t anyone say he doesn’t want the exposure, because he clearly does.
- amerine 7y agoMaybe he doesn’t give a shit? For example, if I make 250k/year and you offer me another 20k a year, but I have to add >10% additional work to my plate... nah.
- eloisant 7y agoHe likely has people working full time to take care of his fortune, so it's not like he would have to micro-manage those solutions.
- mpeg 7y agoBezos would have an army of finance folks doing this, it's zero work for him.
- winrid 7y agoSounds like a promotion to management :p
- mruts 7y agoI dunno, I make over 250k/year in base comp, and if you offered me an extra 20k, I would work an additional 10%. Regardless, Jeff Bezos is most certainly not managing his finances himself, he probably has an army of peons advising him on everything.
- rolltiide 7y agoHe probably doesn't pay m/any taxes on that Unlike income, the raw tax footprint would be at long term capital gains tax rate of 20% + 3.8% and Washington State has no tax on this kind of transactions. He can get a further 50% deduction on that moving half the money to a foundation he owns and controls completely. If he had any carryover foundation donations in the past then it applies here too. Any prior substantial long term capital losses offset this as well and his other non-amazon projects likely pass through Net Operating Losses directly to him (if structured as a partnership) He probably pays 8% tax on this if that, doesn't have to worry about margin calls, its totally free and clear.
- toast0 7y ago> He can get a further 50% deduction on that moving half the money to a foundation he owns and controls completely If he's doing it that way, he's doing it wrong. The right way is to donate the stock to the foundation directly -- this avoids realizing the capital gain and still earns the deduction; possibly a slightly higher deduction because you can claim it at fair market value without selling and selling that much stock will likely reduce the price.
- rolltiide 7y agoFoundation donations of stock/non-cash property are at cost-basis, not fair market value so no. He would have to donate it to another kind of entity under the 501 or 509 tax code to get fair market value deductions. These other types are harder to maintain control of, so it would be the same as just not having the money anymore, which defeats the purpose. I would have to check the SEC filings here, because Jeff may be already selling it through his foundations and the media itself may be aggregating the ownership back to Jeff
- Elpomm 7y agoOn that note, it's a shame all these tax loopholes exist that basically give the wealthy an extra edge over the rest. I'm usually one to avoid the "rich people are all cheating" arguments but this is a case where it actually applies. The feds would get lots of extra revenue from closing these loopholes, too. But lobbying really is effective so nothing gets done, I guess.
- rolltiide 7y agoI don't agree with you. I don't consider these a loophole, and I don't consider the feds the best steward of this money if these privileges didn't exist. I think its a shame that people don't understand the tax code and express their disdain by getting their favorite politician to "tax the rich" by raising "income" taxes, because thats all their gullible constituents know about from their personal experience, and this outcome only affects wage-workers like them. There is almost zero benefit in accurately explaining this because it might actually change. The suggestion I responded to about borrowing instead of selling would further reduce the fed's revenue. I don't consider that a loophole either. A loophole for me would be using inadvertent outcomes of unclear regulatory guidance in a way that people didn't expect. Or passing a law yourself and then using it.
- tompetry 7y agoIt's possible he does borrow against his various equity holdings and you just wouldn't know. This sale is small fraction of his net worth, and cash would likely be a good portion of the collateral.
- erikpukinskis 7y agoDebt costs money. If you are an investor you want to take as much of a share of profits as you can. Hedges like that are for people who can’t afford to cover the downside. Bezos can, so a hedge would just lower the value of his overall holding.
- mruts 7y agoNo, he would make more money using debt than selling shares. Assume he borrows at 3%, then Amazon just needs a higher return than 3% and he has made more money than just selling the shares. What you’re saying doesn’t make any sense.
- mantap 7y agoDebt has a psychological cost too, you owe something to someone, in this case several billion dollars, so not pocket change. Perhaps, after becoming the richest man alive, being free of debt is worth more to him than extra money.