Anyone who has invested in Amazon (and held through the numerous subsequent drawdowns) over the past three decades has made a lot of money. But according to a stunning new analysis, one particular "group" of Amazon investors may have generated the greatest return of all time: Jeff Bezos' parents.
Bloomberg reports that according to a late 90's prospectus, in 1995 Jackie and Mike Bezos invested $245,573 into their son’s then brand new e-commerce website. "It was a big gamble", Mike Bezos, the stepfather of Amazon.com founder Jeff Bezos, said onstage during a 2015 event at the National Constitution Center in Philadelphia.
His son, the world's richest man, agreed "I want you to know how risky this is,” Jeff Bezos told his parents some 23 years ago "because I want to come home at dinner for Thanksgiving and I don’t want you to be mad at me."
If the Bloomberg analysis is correct, Bezos' parents have no reason to be mad; in fact quite the opposite because one IPO and three stock splits later, their original stake could be worth almost $30 billion today making them wealthier than Microsoft's co-founder Paul Allen, the 30th-richest person on the Bloomberg Billionaires Index.
While their exact holdings are not publicly disclosed, and it is a guessing game how much they have sold and own currently, Bloomberg has run several scenarios which conclude that in a "best case" the investment made by mom and pop Bezos would make them the greatest venture capitalist alive right now.
Here's what we know: between 2001 and 2016, they donated 595,027 shares to the Bezos Family Foundation which focuses on education for young people. The 25,000 shares they gifted in 2016 were worth about $20 million at the time. If they haven’t sold or donated anything else, the pair would own about 16.6 million shares, or 3.4 percent of the firm, making them the second-biggest individual owners after their son.
If that is indeed the extent of their sales, the return on their original investment would be a mind-blowing 12,000,000%, a performance that would make even the earliest bitcoin investors, not to mention venture capitalists, blush:
SoftBank’s $20 million bet on Alibaba has returned about 720,000 percent since 2000, according to calculations by Bloomberg. Sequoia Capital’s WhatsApp investment returned roughly 36,000 percent by the time Facebook Inc. bought the messaging service for $22 billion in 2014.
While overall tightlipped about his holdings, in 2015, Mike Bezos - a Cuban immigrant who also goes by Miguel - threw shade at American's saving habits: "We were fortunate enough that we have lived overseas and we have saved a few pennies so we were able to be an angel investor. The rest is history."
He bought 582,528 shares in February 1995, according to the 1997 prospectus. Five months later, Jackie Bezos bought 847,716 shares. The wider Bezos family held this stock through four trusts at the end of 1999, another filing shows. The Jacklyn Gise Bezos 1996 Revocable Trust held 8.9 million shares, followed by the Miguel A. Bezos 1996 Revocable Trust with 4.8 million shares, while the Bezos Family Trust and the Bezos Generation Skipping Trust held 2.9 million and 675,000, respectively.
In a base case, Bloomberg calculates that after applying generic selling patterns and accounting for the disclosed donations, Jackie and Mike Bezos would still control $10 billion of shares. Even if they had unwound all of their Amazon holdings at the lowest possible price, they still would have reaped about $100 million.
The various scenarios are summarized below.
It's not just Jeff's parents: his siblings Mark and Christina may also be set for life after making a modest investment back in 1996, when they each bought 30,000 Amazon shares for $10,000 in 1996. If they haven’t sold any of those shares, their stakes would be worth about $640 million apiece.
Making great investments certainly runs in the family, because an early an investor in Google was none other than Jeff Bezos himself, who put $250,000 of his own money into the internet-search startup in 1998, according to the New Yorker. Those shares, valued at about $280 million at the IPO, would be worth more than $8 billion today, just in case Bezos' $147 billion fortune from his AMZN share holdings wasn't enough.
In an amusing twist, if Bezos' parents had listened to investment advisors, their wealth would be far less, as "any self-respecting wealth adviser likely would have pressed the family to diversify their holdings given the "heightened consequences of such extreme individual company exposures," according to Eduardo Gruener, co-founder of Miami-based multi-family office GFG Capital."
Of course, this example could well be a case study in survivorship bias:
"Extraordinary returns don’t come around often” said Gruener. "Replace Amazon with nearly any other name in the market and the ending may have turned out as a nightmare."