07
August
2013
|
09:49 AM
America/Los_Angeles

Here's Why Bezos Had To Use His Own Money For Washington Post Buy

Jeff Bezos had to use his own money for buying the Washington Post. The newspaper group, with its $54m in 2012 losses, and large pension liabilities, has losses of $49m in the first half of this year:

PJ 13 08 06 NewsSales landingpage 2

 

Those losses would have dragged down $AMZN's finely balanced, barely-profitable financials. Mr. Bezos' stoic shareholders have supported his long term strategy to an extraordinary degree of loyalty unmatched anywhere, including Apple [$AAPL]. But that long term strategy is understandable to them and it is scalable.

There's no strategy at the moment for the Washington Post — which is why it couldn't be an $AMZN acquisition. There's no need to startle the shareholders.

However, the venture will benefit $AMZN, there will be tremendous value from the association with the Washington Post. The genius of Mr. Bezos' strategy is that Amazon gets the benefit but carries none of the costs of the venture on its books.

That protects the company's share price, and also, Mr. Bezos' $25 billion share of the business.

For just 1% of his fortune, Mr. Bezos bought some very cheap and effective insurance for himself, and for his fellow $AMZN shareholders. 

It's a an interesting hedging strategy from the former hedge fund manager.