The Jeff Bezos Personal Empire

The Jeff Bezos Empire – Diversification of Assets for Profit Maximization
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Signature Assignment:
Stacey Troup
Investments & Portfolios/ MBA-623
February 18, 2019
Professor Dr. Ralph Ezelle
Touro University Worldwide

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Abstract
From the humble beginnings of Amazon.com by founder and former hedge fund exec
Jeff Bezos come his individual investments geared toward education, growth in tech sectors, and
personal financial growth through diversification of investments. This paper takes a look at how
he takes his Amazon profits and turns them into both philanthropic and business ventures to
grow his own portfolio as well as the overall value of the company.
Keywords: Bezos; Portfolios; Personal Growth; Diversification

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Portfolio Diversification and Investments – Amazon/Jeff Bezos
Jeff Bezos built Amazon on a great risk and a loan from his parents. In return for this
risk, the reward proved fruitful and everyone recouped their investments but for the average
investor back at this time, the decision to invest, risk, diversify, and acquire like Bezos did may
prove out of range or ability. Only through a review of the underlying financial data, the stock or
bond offerings which determine present value and future rewards, can an investor determine if an
investment is right for them. Throughout this paper a review of the specifics of Amazon
offerings, puts to calls, stock valuations, financials, and other pertinent information relating to
the underlying value of an asset while taking a look at how Bezos and his family set themselves
apart from the company through diversification of portfolios which are separate from the
company and are aimed at their long term goals. When we understand how to value a company,
we understand how to make decisions that drive our investment success and decisions.
The Jeff Bezos Story
From a young age, Jeff Bezos seemed to have the drive for success. After being adopted
by a Cuban father following his mother’s second marriage, he excelled in programs of
entrepreneurship during his high school years, developing his first company, the Dream Institute,
which was a summer camp program for 4-6 graders. During his collegiate years, he showcased
an interest in space exploration which would remain with him throughout his life and ventures
(Jeff Bezos Biography, N.D.).
After becoming the youngest VP for D.E. Shaw, an investment house in New York City
(N.A., Jeff Bezos, N.D.), Bezos took a gamble on his future when he left his lucrative position in
corporate finance, borrowing $300,000 from his parents for seed money and starting
Amazon.com as an online bookseller in 1995. With that money, he began enlisting the

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assistance of a crew of 10 people to run the company out of his Seattle, WA garage after moving
his family to that location prior to the IPO (Biography.Com Editors, 2014).
Financial advisors and the industry as a whole were vastly unprepared for the success that
Amazon would showcase in the world of business, finance, and emerging markets. The
company went public in 1997 at just $18.00 per share while analysts pondered the possibility of
the company’s success as an online bookseller while other retailers continued to build their own
sites as an attempt to thwart the company’s success (Leonhardt & Carter, 2018).
Over the years, Bezos continued to “up the ante” of his business ventures, as will be
discussed in detail, all the while driving up his business profile, stock price, valuation, company
profile, holdings, and personal investments through carefully planned investments and strategies
that have served the Amazon founder well over the years.
Amazon Beginnings – Diversification of Company Assets
Following the IPO in 1997, Jeff Bezos did not sit idly by riding the wave of success
afforded him through his business ventures of online book sales. Early on, Bezos recognized the
need for change in the future in terms of the availability of products to consumers via the
internet. He continued this theory as he was determined to grow the company size and presence
through carefully planned acquisitions and offerings within his both business and personal life.
Amazon began to grow shortly after the IPO was offered. By 1998 the company had
expanded from its books offerings to CD’s, videos, clothes, electronics, toys, etc. through its
business affiliates and partnerships with suppliers. This was the first implication that Amazon
had the intention to help small businesses flourish as it offered products which were not readily
available to the general public at the brick and mortar stores. During this time, analysts in the
financial industry questioned if Amazon could survive the tech bubble but Bezos was determined

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to see it through. Going from sales of $21k a week in 1995 to $17B per year by 2011, he proved
that the site was exactly what consumers were searching for (Biography.Com Editors, 2014).
2006 brought another change for Amazon in the form of its first VOD service and by the
time the company reached its 10 year anniversary, they decided to branch out into their own
offerings. Consumers embraced the first generation release of the Kindle as a cost-saving
alternative to the IPad™ from Apple™ (Biography.Com Editors, 2014). However, in 1999 he
was awarded his first patent for the “buy it now” button offering which is a precursor to the data
mining methods of today. Taking from his small company offerings and technology
backgrounds, he continued to grow the offerings of the company through the third party
marketplace, and by 2003 had launched Amazon Web Services which was a licensed platform
for sales available to other companies to help them grow their presence and sales online while
becoming pioneers in the future of data miing and artificial intelligence (AI) (DePillis &
Sherman, 2018).
Seeking to continue his global dominance in the virtual space, he launched Joyo
Amazon™ in China as a rival to Alibaba.com, which has yet to come to the success rates of the
dominant Chinese online retailer who has enjoyed great success the US markets through extreme
price slashing methods. February 2, 2005, is a red letter day in history as this is the day Amazon
Prime™ was introduced. Now one of the most valuable assets held by the company, it has
expanded from offering just two-day shipping to members to allowing VOD streaming, music,
grocery delivery, etc. as the program is ever evolving to meet the demands of the consumers –
including select market drone delivery service through one of Bezo’s personal companies (as of
2019) (DePillis & Sherman, 2018).

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The continued quest for increased valuation of his company stock, Bezos began not only
partnering with businesses but he acquired a number of them as well as a means to diversify the
corporate portfolio of Amazon. Among these acquisitions include Audible in 2008
(audiobooks), Zappos in 2009 (Shoes), and Kiva Systems in 2012 which is the robotics company
behind the automated warehouses and fulfillment centers Bezos runs. 2013 brought the
monumental purchase of the Washington Post newspaper company from the longtime grasp of
the Graham family for over $200M. In addition, Amazon also announced Sunday package
delivery available for members as his stock began to climb to $354.38. With the failed
smartphone release in 2014 came the acquisition of Twitch (gaming platform) which is a resale
product through Amazon Web Services (DePillis & Sherman, 2018). A full view of money
spent to diversify the offerings of Amazon as well as the acquired companies can be found Here
(Zaroban, 2018).
By the time the first retail store opened in Seattle, WA, Amazon stock had soared to
$628.35 per share and November of that same year brought the highly sought after and long-
lived Amazon Echo™ offerings (bringing the stock to $659.68) (DePillis & Sherman, 2018).
2017 brought the most landmark deal to fruition when Bezos decided that Amazon should
acquire Whole Foods for $13.7B through a highly confidential and structured bond offering to
select investment banks. Public knowledge of this acquisition caused the stock to jump to
$987.71 per share when word hit the street as the stock continued to grow at exponential pace
(Linnane, 2017) (Ungarino, 2018) (DePillis & Sherman, 2018).
In 2018, Amazon reached $1T in market cap as the stock soared to $2039.57 per share.
As a result, the company announced a corporate policy of $15.00 per hour minimum wage for
workers as locals stammered to acquire entry-level jobs with the internet giant (lowering the

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stock to $1971.31 as of October 2. The final hit to Amazon came when the company announced
plans for a second headquarters and NYC was announced to be the winner. Due to heavy
demands from the retailer in the form of tax incentives and other concerns over their presence in
the area, NYC and Amazon could not come to terms on the development of this location due to
the controversy and the demands the company placed on the government. This maneuver
resulted in a heavy stock drop to $1,621 per share as of February 14, 2019 (DePillis & Sherman,
2018). As of February 22, 2019, shares in Amazon continued to fall and were recorded at $1,630
per share with a market cap of 801.055B (Amazon Market Watch, N.D.) (Goodman, 2019).
Behavioral Economics and Valuation
Amazon Web Services, one of the leaders in the artificial intelligence game, has used
behavioral economics to help drive revenue, sales, and overall company valuation by utilizing
basic behavioral economics principles. This was accomplished through tactics like “Prime™
Free Shipping”, free same day delivery, recommendation of similar items (the upsell) and other
basic emotionally driven tactics that drive people to see an inherent value in their purchase by
adding options like the free shipping or complimentary items to their intended item which are
shipped for free and at a much lower price than retail stores, as an added value. This perceived
value drives emotional shopping trends and has helped become the building blocks upon which
Amazon’s entire company is built upon (Patel, N.D.).
Whole Foods Acquisition – A Deeper Look
While Amazon paid a reported $13.7B in order to acquire the Whole Foods chain of
stores, the specifics of the deal are widely kept under lock and key. The acquisition was
accomplished through a $16B bond deal with investment banks Bank of America – Merrill
Lynch, Goldman Sachs, and JP Morgan Chase in a seven-part deal (EX 4.2, 2017) (Linnane,

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2017). Among these offerings included two of particular interest which will help explain the
high-interest offerings offered on these debt obligations. The first of these offerings, a special
designed bond offering specific to the needs of Amazon, was a 40-year unsecured bond sold at
$2.25B face value (for an undisclosed amount) with a 4.29% yield (while tranches were offered
at a 3.5% weighted average cost as a means to offset the higher risk portion of this long term
option). The breakdown of the benefits of this specialty product offering (which appears to have
been purchased by Wells Fargo) (EX 4.2, 2017) is as follows (Chen, Tranches, 2018):
Bond Duration: 40 years
Bond Value: $2.25B
Yield: 4.29% (paid semiannually)
Number of Payments: 80
Market Rate: 30 Year Bond @ 2.89% a/o Option Date
As there are no other 40 year bonds available at the time of this offering, the prevailing
rate at the time is estimated to be 2.89% for the period of the sale in 2017. This formula utilizes
premium bond pricing due to the prevailing interest rate on bond being higher than the market
rate at the time of issue. By definition, premium bonds are those who possess a higher interest
rate than the prevailing market rate of a government bond, in this case, the bond issued at 4.29%
and the market rate was approximately 2.89% (Chen, Discount Bond, 2017).
$2,250,000,000 x 4.29% (APY Yield) = $96,525,000 (interest payments on loan)
$96,525,000/2 (twice yearly payments) = $48,262,500 semiannually
For purposes of this exercise in present value of bond and bond valuation, we are
assuming that the bond has a flat repayment structure and a stable, locked in interest rate (which

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this in actually does not but will be assumed for simplicity) (EX 4.2, 2017). If the bond has this
flat payment schedule, the repayment would resemble this:
Value of Bond at Maturity: $2,250,000,000.00
Interest Payments Over Life: $3,861,000,000.00
Total of Bond Valuation: $6,111,000,000 (P+I)
Profit Margin Represented: 71%
Overall Profit of 271.6% (P&I)
For a company with the high volatility such as Wells Fargo possesses, this bond
represents a guaranteed liquidity measure over the next 40 years provided that Amazon does not
default on this offering. This bond pays a significantly high-interest rate due to the implied
risk/volatility of the investment as when offered, it was offered as an unsecured obligation
meaning that no underlying asset was risked as part of the offering (EX 4.2, 2017)
Another example with different parameters more in line with investment decisions and
offerings considered “standard” is the issuance of USU02320AG12 and U02320AG1 which
were bonds totaling $3.5B USD available in lots of 2,000 initially with additional lots being
purchased in lots as low as 1,000 (at a discounted price). The issue price of this bond was at a
99.820% of face, was AA rated and came with a 3.15% yield (Investopoli News, 2017).
Investment returns on this bond appear as follows:
Option Specifics
Face Value of Option: $3,500,000,00
Issue Price of Bond (Discounted): $3.5B x .99820 (discount rate) = $3,493,700,000
Rating of Option: AA
Yield: 3.15%

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Duration to Maturity: 10 years (20 payments)
Annual Yield on Bond: $110,250,000 or $55,125,000 Twice Yearly
Profit Breakdown:
Bond Price at Purchase: $3,493,700,000
Value at Maturity: $3.5B
Profit on Bond Purchase (before interest): $6,300,000.00
Interest Payments At Maturity: $110,250,000 x 10 = $1,102,500,000
Total Return on Investment Over 10 Years: $4,608,800,000
Profit on Investment: 31.68% or 131.68% return on investment
If these calculations are based on the discounted price at time of purchase, the numbers
are skewed slightly. For this calculation, we use the purchase price of the bond as it was
purchased with a capital appreciation attachment via the discount rate attached to the bond
pricing. For this calculation, we base the interest rate on our purchase price of $3,493,700,00 as
follows:
Bond Price at Purchase: $3,493,700,000
Interest Payments at Maturity: $110,051,550 x 10 = 1,100,515,500
Total Return on Investment Over 10 Years: (3.5B-$3,493,700,000)+ 1,100,515,500 =
ROI = 1,106,815,500 +3.5B (Face) = $4,606.815,500
Profit on Investment: 31.86% or 131.86% return on investment
(numbers are close but better profit is made via the discounted rate)
Credit Rating and Impact on Stock Price

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Investors far and wide have weighed in on the impact of this offering on both the
valuation and credit rating of Amazon as well as has Jeff Bezos as he discussed the reasoning
behind the bond offering. First, investors believe that the company (at time of acquisition and
offering) had an EBITDA of between $14 and $19B, which was almost what they were seeking
to raise through this bond offering in order to finance the acquisition of Whole Foods (Buerkle,
2017). Analysts were cautious over the purchase due to the size of the debt obligation as well as
Amazon’s experience with an acquisition of this size without consulting with industry experts on
both favorable and unfavorable consequences of such a deal (Ratner, 2017)
The offering, which lowered the company’s credit rating from positive to “stable” as a
result of the massive debt obligation (in comparison to their liquidity, while lowering their rating
to Baa1 Moodys rating) (Goldfarb, 2017) was done in lieu of a cash offering because of the
negative implications the cash purchase would have on the stock valuation at the time. Had the
company paid cash for this acquisition, the stock price would have been diluted due to the debt to
asset ratio of the company as well as implied liquidity measures (Heath, 2017). This high risk
maneuver on the part of Amazon through debt financing with an unsecured offering, is one
backed by the big investment banks as they believe in the sustainability of Amazon while smaller
firms are troubled by the tumultuous waters that this offering presents in terms of liquidity
measures as the company continues to grow at an exponential pace.
Breaking Down the Terms
Throughout the valuations, some terms were discussed which render greater explanation
including tranches, discount bonds, premium bonds and the reasoning behind these terms.
Beginning with tranches which are how a security is sold against its underlying default risk it is
discovered that “tranches” means slice/piece in French which is how these options are sold.

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Pieces of the investment are broken up and sold to different investors for different values and
classes. In the case of the bonds discussed previously, these were offered as unsecured bonds
meaning that no underlying asset was put up as collateral in the event that the company
(Amazon) defaults on its obligations to repay these bond offerings (Bond Tranches, N.D.). In
addition, bond tranches allow for investors to create a single or several classes of securities with
a higher rate of return than the “underlying asset pool” (being the asset to which the derivative is
based, in this case, the value of the company being purchased, Whole Foods). The tranches, in
this case, were sold at an average of 3.5% of WAC (Ratner, 2017).
Discount bonds, which are those bonds sold at a price less than the bond face value, are
sold at an interest rate lower than the market rate while deep discount bonds are those sold at a
rate of 20% or higher and are done so because the underlying bond is considered to be at a higher
risk than nondiscounted bonds (Chen, Bond Discount, 2018). In order to determine the present
value of a bond, we need to run some fast math to accomplish this (Chen, Bond Discount, 2018).
Implied Formula for Bond Pricing:
Where: C = coupon payment, i = interest rate, or required yield, M = value at maturity
(par value), n = number of payments (Folger, N.D.)
For our bond which was a discount bond for 10 years and a value of $3.5B, we would use
the following (assuming a 5% market rate for argument sake):
PV = PMT*(1-(1+.025)^20/1.025 or
PV = $3,500,000,000*3.15% (to determine payment) = $110,250,000 (Full simplification
of answer in APPENDIX “B”)
Our final bond valuation arrives at a present value of $2,995,300,871.00. However, this
bond was sold at a discounted price valued at 99.820% of par which resulted in a cost of

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$3,493,700,000. Interest payments over the life of this bond offering will amount to
$1,102,500,000 in interest payments alone which will more than account for the increase in
payment required for purchase of the bond (although the difference results in paying
$498,399,129 additionally for the bond). This payment structure of the bond also alerts us to the
lower risk of the bond falling into default as it is sold near par value and is not deeply discounted
as higher risk bonds are (Investopoli News, 2017).
Premium bonds are those sold at or above face value, such as our example of the rare 40-
year bond offering that was purchased by Wells Fargo. No discount was applied to this bond and
it came with an interest rate 1.45 above that of the Treasury Rate (Investopoli News, 2017).
Stock Implications From Whole Foods to Present
As Amazon acquired companies, the stock rose in value as the company’s inherent value
grew (expected revenues after acquisition). Having the greatest growth following the acquisition
of Whole Foods, A deeper look into the reasoning behind this jump of over $300 per share which
is almost unheard of in todays markets is required.
On the news that Amazon would purchase Whole Foods, the company stock went from
$659.68 per share to $987.71 per share, a difference of $328.03 (per share). The company had
just taken out $13.7B in new debt through their offering to purchase the retail chain of Whole
Foods. However, if the valuation of the company is to be determined by number of shares
outstanding (taken from today for ease), the value of this piece of news caused a shift in Amazon
stock worth ($328.03 x 491.2M in outstanding shares/today) $161,128,336,100 which means that
the tech giant essentially acquired this retail chain for free (Pisani, 2017).

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While with every acquisition (reasonably) the stock grew, the implied value of the
company with the EBIDTA (earnings before interest, taxes, depreciation, taxes, and amortization
– aka the Net Earnings) growing exponentially with each acquisition (EBIDTA, N.D.).
However, not everything the company does is met with the best impact on their stock
offering. In 2019, they pulled back an offer to build their HQ2 in a suburb of NYC and upon
hearing the news, the general public retaliated by hitting the company with a major stock hit,
lowering the stock price to $1619.44 as of close on February 21, 2019. This impact results in
loss in revenue (valuation) of $407.95 per share which, from the stock’s high point of $2,039.51
in September 2018, resulting in a loss of $326,943,368,500 (801.43B volume) which caused the
stock to be downgraded to “Sell” or “bearish” APPENDIX“C” (Amazon, N.D.). The term
“bearish” refers to a stock which investors and analysts believe will drop in value and is
therefore on the sell side of investments.
Get Them To The Greek
“The Greek” as it is referred to in financial circles, is a reference to how a bond is
evaluated based on algebraic logistics. For example, the “Greek” consists of Delta, Alpha, Vega,
and Theta, which are sensitivity measures for quantifying factors of the bond, but not a
determination of the pricing of same. The price is based on the following chart relating to
intrinsic value: Intrinsic Value
Spot (current) Price Strike (call/buy) Price

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Simply broken down, the time value of the investment has a direct impact on the value of
a call or put option (call being the right to buy, put being the right to sell). When the time to
maturity (TTM) is longer, the value is high (and the reverse for short TTM), this is because the
investment has a better chance of reaching the intended call or strike price the longer time goes
on (Folger, N.D.). The strike price of an option determines the intrinsic value of the stock over
the maturity of the option. Time value is encompassing of TTM, volatility, and Rate of Interest
(RHO)
Volatility relates to how much risk is involved with the option in question. The higher
the volatility, the higher the price. Rate of Interest (RHO) is considered “far out” if the option
has a maturity date of longer than 6 months.
The Delta consists of the spot and strike prices while Gamma is the rate of change. An
analogy that helps to remember this is that the delta is like a cars speed. Where the delta is the
car, the Gamma is the speed at which the car travels. In other words, it (Gamma) is the rate of
change to Delta within the option. Vega is the volatility of the option based on the risk factors.
The Vega changes for every 1% change in either direction. Theta, or Time To Maturity (TTM),
is the value of the options as they decrease in value while approaching their maturity. Rate of
Interest, or RHO, is the rate of interest that an option pays and is not impacted by the TTM
(Theta) of an option. Delta is always based on upward movement. Additionally, options
considered “in the money” have a greater Delta value (Chen, The Greeks, 2018).
The Gamma, or the rate of change of the Delta, is based on a $1.00 change in the stock
price for every point the Gamma Changes. Options with the highest Gamma are most responsive
to changes in the price of stock. An easy way to assimilate this is that the Gamma is the profit or

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loss for every $1.00 shift in the Delta. Gamma is highest around “in the money” stocks (Chen,
The Greeks, 2018).
Volatility boosts the value of long term investing options. It implies the rate of change
between the underlying option’s value and the implied volatility of same (Chen, The Greeks,
2018). Essentially, the greater the volatility, the greater the opportunity for larger rewards on
long term options, but also the risk is decidedly greater as well (so the probability of loss is
great) (Chen, The Greeks, 2018)
The Theta, or time decay of an options value, is the main enemy for any buyer but the
best friend of an option seller. This is because as time goes on, the intrinsic value of an option
can greatly rise or fall as the time increases. This gives the greatest ability for a stock to climb
(causing the buyer to pay more) or a seller to make more as the price rises and they are able to
sell their options for more money than they paid (in comparison to the maturity date of the
underlying asset) (Chen, The Greeks, 2018).
The Vega is where all the money is made. Aptly reminding you in namesake to that of
Las Vegas, this is the easy way to remember which of the Greek formulas brings the most value
to your options trading. The Vega has no effect on the intrinsic value of an option and only
impacts the “time value” of the investment/option price. This number is drawn from the next 1%
increase which is derived from Volatility and brings value (Chen, The Greeks, 2018).
Looking at the Greek and valuation (for options) for an Amazon-specific trade, let's
assume we purchased a 40-day call option at $1,622.50 with a contract price of $60.15 (x100) for
a total investment of $162,215 (which is the same as the strike price). All profit will stem in
value of the stock settles at a value over $1,622.15.

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In scenario “A”, we assume the stock settles at a price of $1,800 and the put option was
purchased for a strike price of $1,710. The cost of this option was $9,220. As the strike price is
lower than our strike price, we would not exercise our option and we would lose the option value
of $9,220. However, the following would occur:
Original purchase price of stock: $162,500+$5715 = $168,215
Sale of stock at market rate: - $180,000
Total Profit: $11,785
Less: Loss on Put Option Contract ($92.20) - $9,220
Overall Profit: $2,565 or $25.65 per share
Alternatively, if we assume scenario “B”, where the stock finishes at $1,602.00, we can
assume the following:
Original Purchase Price of Stock $168,215
Cost of Put Option $9220
Total Costs (total invested): $177,435
Exercise and Sale of Put Option ($65.00 ea) - $6,500
Recovered Costs (Price + exercise sale) $170,935.00
Current Value of Stock: $160,200
Profit on exercisedsale of Put Option: $2,720
Occasionally, options may become a loss to an investor but a profit still made. This
happens when a put option is purchased for a strike price but the market rate of the stock is
greater than the strike price of the option purchased. In these cases, the investor will lose the
value in the put option (or may offer to resell it) but will likely sell the stock for the prevailing
market rate as a way to make a profit. Alternatively, the exercise option should be used when the

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value of the stock drops dramatically as you are able to recoup your investment through the
guaranteed sale of the stock at a higher price, this will make your put option exercisable and
valuable to you in the long run (Option Alpha, 2016).
The review of the Greek on these specific trades reveals exactly what was discussed in
the overview of how the Greek is used to value stock, risk, and volatility of options. On the
$1,625 call, the Theta is -.702 (AppendixE). Alternatively, we can see the breakeven points as
well as the projected limitations of income expectations from (APPENDIXA) which helps to put
the expectations of a trade into a visualization.
Earnings Per Share
Through these carefully planned acquisitions, partnerships, and investment strategies,
Amazon has managed to increase the value of their stock offering to unprecedented levels. In
2013, the (basic) earnings per share were estimated at .59C, while in 2017, the same class of EPS
was valued at $6.32 per share, representing an increase valuation to investors of 971.18% (N.A.,
Investor Relations, 2018).
In retrospect, an early onset investment in a company such as Amazon could have had an
impact on a persons personal financial standing. For example, with the factors of inflation
factored in, it is estimated that if you had invested $1,000 in Amazon when they released their
IPO offering, your investment as of September 4, 2018, would be valued at $1,362,000 – or you
would have experienced a portfolio increase of 136,100% (Leonhardt & Carter, 2018).
These acquisitions and bumps to the stock valuation have given Jeff Bezos and Amazon
the designation of the most valuable company in the world when, in 2018, the company
valuation of Amazon topped 1 Trillion (Salinas, 2018). The underlying factors in the company’s
success in meeting the expectations of Apple™ were based on both diversification as well as the

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underlying success in the divisions of the company such as Amazon Web Services who drive a
great revenue to the company outside of deliverable goods (Salinas, 2018). Both Apple™ and
Amazon™ are considered “blue chip” stocks and are traded on major exchanges (both currently
in US on NASDAQ) due to their company valuations (NASDAQ considered a “dealers market
major exchange) making them attractive to investors both large and small while expanding the
availability of the offering from institutional investors to the general public.
Diversification Beyond Amazon – Jeff Bezos Personal
While Jeff Bezos came from a very affluent family in Texas connected to the oil industry,
who also helped the funding of Amazon through a loan to their son of approximately $300,000
back before Amazon went public in exchange for very risky shares of the company. This
investment created immense wealth for the entire Bezos family, which was converted into a
“family money” office where the family invests in projects separate from the company (Amazon)
in order to gift grants and grow their own valuation of wealth (Bloomberg, 2018) (Maverick,
2018).
The Foundation, called Bezos Expeditions, is a major player in the field of R&D for the
future. Investing in companies for space exploration, robotics, technology, and even every day
companies we have grown to know as commonplace such as AirBNB, Uber, ZocDoc and
Workday (many of which are also publically traded now). In addition, the Foundation gifts
grants for education and scientific research in the field of cancer research, having given a grant
to Dr. Fred Hutch for $34M a few years back to help find targeted cures for cancer (Bezos
Expeditions, N.D.). The Bezos Family Foundation is an arm of Bezos Expeditions which does
educational grants to both US and international students who strive for change and success on a
global scale (N.A., Bezos Family Foundation, N.D.).

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Bezos Expeditions also invests heavily in R&D in the field of space exploration, in the
market with such players as Richard Branson (Virgin CEO) and Elon Musk (Tesla) who are all
in a race to get people to space first on the first chartered space flights to the moon and beyond.
This arm of Bezos’ empire, is called Blue Origin, is one of the projects that Bezos invests
heaviest in. On average, Bezos spends approximately $22B (in 2017) on R&D ventures through
Amazon while driving changes in the same arena (biotech, space, robotics) through his family
office. (Loeb, 2018).
Diversifying his assets beyond that of the company’s interests while sticking with what
he is most interested in has proved fruitful for Bezos and his family. In 2018 he was named the
wealthiest person in the world, removing Microsoft founder Bill Gates from the top spot for the
first time in years (Frank, 2018). This designation was based on his ability to diversify his own
portfolio sperate from that of his company, Amazon.
Conclusion
Carefully planned company goals, investments, acquisitions, partnerships, and trends can
help drive success, but it takes more than just an idea, it takes a vision for the future and an
expectation of what the public wants which is often impossible to gage.
Jeff Bezos built a company on borrowed money taking great risks with both his personal
portfolio and his company when he borrowed family money to create books. He continued to
grow the offering and is now considered the number one platform for helping drive the success
of small businesses which were, at one time, very hard to get launched due to the market
saturation of larger companies.
Risk and reward of both home and company have faired Bezos well thus far, but the future
may not be as stable with the recent bond offerings and the idea that the company is unstoppable

21
for the next 40 years. Innovation is driven by ideas and how far can an internet retailer really
take the offering? The bond offering of 40 years, as well as the other bonds which were used to
fund the Whole Foods offering, are very risky for investors as they are offered with unsecured
assets, the essential principles of buying a house on your word with no money down.
Only time will tell if the risky propositions will fair Amazon well. The hits to the stock
over the public profile of the company following some poor decisions and pure greed (tax free
status while still collecting taxes) have driven him out of New York for HQ2 project and from
there it is a short trip to a collapse should the public turn on him or he fail to continue driving the
innovations that brought him the success.
Is Amazon really worth a $2k stock price or has the internet retailer topped out and been
overvalued by investors? We are starting to see the Amazon bubble burst with the great loss in
valuation of the stock but how he utilizes the company and personal image to recover this loss
will be a testament to the strength of the overall brand. Not basing the outlook of the future on
past success will be a good risk measure to determine future growth and value.
Advanced mathematical formulas allow us to see beyond the numbers and into the “soul”
of the company value. Ideals that just because a stock is “blue chip” and institutional investors
stammer to attain the stock is no indicator that the value will sustain or that the company is a
good buy. Because of recent macroeconomic and microeconomic actions on the part of both
person and company, the stock has lost a significant portion of the value and has been
downgraded to “sell” as the debt to asset ratio is now very large with long term capital
repayment terms. Jeff Bezos will have to continue to reinvent himself and his company should
he wish to continue his success and we should not invest in a company on reputation, but should
value the company for ourselves to see if the risk is worth the reward. This is the only measure

22
of safe investing that keeps our goals within reach without liquidating our position or our nest
egg through frivolous investing.

23
APPENDIX A
ROI When Buying $1615 call on 2/22/19 and Selling It on 3/15 When Stock Rises to $1680 Per
Share

24
APPENDIX “B”
Present Value of Bond Calculation
Variables
C = coupon payment = $110,250,000.00 (Par Value * Coupon Rate)
n = number of years = 10
i = market rate, or required yield = 5.000% = 0.05
k = number of coupon payments in 1 year = 2
P = value at maturity, or par value = 3500000000
Present Value of Ordinary Annuity Formula
Bond Price =
C/k *
[ 1 - [
1
] ]
(1 + i/k)nk
i/k
+
P
(1 + i/k)nk
Plug In The Variables and Solve
Bond Price =
110250000/2 *
[ 1 - [
1
] ]
(1 + 0.0500/2)10*2
0.0500/2
+
3500000000
(1 + 0.0500/2)10*2
Bond Price =
55125000.00 *
[ 1 - [
1
] ]
(1 + 0.0250)20
0.0250
+
3500000000

25
APPENDIX “C”
Amazon Stock February 22, 2019
(1 + 0.0250)20
Bond Price =
55125000.00 *
[ 1 - [
1
] ]
1.639
0.0250
+
3500000000
1.639
Bond Price = 55125000.00 *
1 - 0.6103
0.0250 +
3500000000
1.639
Bond Price = 55125000.00 *
0.3897
0.0250 + 2135948300.01
Bond Price = 55125000.00 * 15.59 + 2135948300.01
Bond Price = 859352571.00 + 2135948300.01
Bond Price = $2,995,300,871.00

26

27
APPENDIX “D”
Amazon Stock Forecast W/Greek

28
Appendix E
Call Option & Greek of Amazon Option

29
Appendix “F”
Calls for $1625 Strike Options: The Greek

30
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