A version of this article is featured in CNBC’s Inside Wealth Newsletter, and Robert Frank is a weekly guide to wealthy investors and consumers. Sign up to receive future editions directly in your inbox.
Larry Ellison has built the second largest fortune in the world by holding him Oracle It has been around for over 50 years and has been around for ups and downs. At the same time, he spent billions on philanthropy, vast real estate holdings, sports investments and funding his son’s burgeoning media empire.
How can he spend so much while selling?
A closer look at the Oracle Chairman’s finances and stocks reveals the wealth built on a mountain of leverage and risk, allowing you to borrow shares from the stock and raise cash without giving up on your shares or control. When many tech CEOs follow the wise advice of wealth managers to “take money off the table” and diversify through stock sales programs, Ellison, even at 81, represents the victory of old-fashioned wealth creation.
“Ellison appears to stand out not only because of his wealth, but also because of his enormous size of stock he has been pledged,” said Michael Three, associate professor of finance practice and managing director of the Analytics and Transformation Technology Center at the University of Texas at Austin.
Ellison owned 1.16 billion shares of Oracle as of July, accounting for 41% of the company’s total stake, according to SEC filings. His individual stock ownership is the largest of the 10 tech billionaires. For example, Elon Musk owns less than 20% TeslaMark Zuckerberg owns about 14% Meta Stocks and Jeff Bezos stocks Amazon After selling more than $18 billion in value over the past two years, approximately 8% of the shares have been issued.
Ellison has been selling Oracle stocks for many years, but mainly uses options and sells to pay taxes. According to Smart Insider, Ellison has totaled $5.1 billion from its stock sales. Sales included $900 million in stake sold in 2001. This sparked a final settlement with an insider trading lawsuit just before the stock plunged into a disappointing earnings report.
Oracle also played a role in turbocharging Ellison’s equity stakes. According to Barron’s, Oracle’s stock repurchase program has reduced the number of shares outstanding by 36% over the past 15 years. The decline in outstanding shares has led to Ellison’s shares increasing from 23% to 41% of outstanding shares, but his share count remains stable.
Still, Ellison continues to spend record money on real estate, sports, collectibles and other assets. His personal empire includes dozens of luxury properties, Indian Wells Tennis Tournaments, Lanai on Hawaiian Resort Island, a collection of Vintage Fighter Jets, a 288-foot mega-yacht and Oak Palm Beach Resort & Spa in Manalapin, Florida. The purchase comes after paying $173 million for a 62,200-square-foot mansion in Manalapan, the highest ever sold price for a Florida property of its time.
Ellison also funds a huge number of private companies. He invested in Elon Musk’s Twitter purchase, now called X, and provided Musk with “a billion or something you recommend,” according to a later published text exchange. Ellison has also invested in several longevity and high-tech startups and co-founded the global sailing league, Sailgp.
Recently, Ellison has emerged as a behind-the-scenes media tycoon. He bought Skydance Media, run by his son David, a merger that closed last month for $8 billion. Now, the Ellison family reportedly support the majority of Paramount’s cash bids for the Warner Bros. discovery, which could be a deal of over $70 billion. Oracle is one of the companies that teams up to buy Tiktok’s US business, although it is unclear whether Ellison himself will personally invest.
Ellison also gave hundreds of millions of dollars to charity, reportedly worth $10 million last year as part of any voluntary contract for University of Michigan football recruit Bryce Underwood. Ellison, the signer of the Pledge of Giving, posted in July on X that he “focuses resources” at the new Ellison Institute of Technology, a partnership with Oxford University to find solutions to climate change, disease and world hunger.
To fund all of that spending and maintain his stake in Oracle, Ellison borrows heavily against his Oracle shares. According to the latest SEC filing, Ellison has pledged 277 million shares of Oracle common stock as collateral “to secure certain personal debts.” The stock represents about a quarter of his total shares, with market value exceeding $82 billion at closing Wednesday.
Oracle stock for 3 months.
Most companies prevent or limit executives from borrowing against their shares to avoid forced sales during a crisis or decline in stock. However, Oracle has given its chairman and its largest shareholders more room. Oracle’s Governance Committee said in a filing of the SEC that it “despites that Mr Ellison’s pledge arrangements pose no significant risk to shareholders or Oracle. The board also said it believes Ellison “has financial ability to repay his personal loans without resorting to the pledged shares.”
Three said the size and value of Ellison’s pledged stock is “off the chart” and that most boards will never allow that level of leverage due to risk to shareholders.
“Ellison is the exception,” Three said. “His wealth and influence make lenders comfortable in such a way that they don’t have the majority of executives. For many other companies, this level of borrowing raises real governance concerns and is likely to be considered a red flag.”
It is unclear how much Ellison has reduced to loan. In rare comments on his borrowing and spending strategies, Ellison told CNBC in 2012 that the $4 billion credit line on his stock at the time was never lowered, but was maintained as a potential dry powder for large-scale purchases.
“I have a line of trust just in case I go shopping and something catches my eye,” he said, referring to it as a potential example of the NBA’s Los Angeles Lakers being put for sale.
Ellison’s Hold and Borrow strategy is in stark contrast to the sales of Oracle CEO Safra Catz. The Cats continue to sell options they received from Oracle when they do their best, and maintain a small stake in the company. According to Smart Insider, she used a total of $2.5 billion options to sell in the first half of the year, becoming the biggest insider seller of the year. She was sold under the so-called 10B5-1 program, a pre-scheduled stock sales program, and missed a 50% runup of Oracle stock in the next few months.
The bankers and wealth advisors of high-tech founders and CEOs say there is no right or wrong approach to managing a company’s large equity position.
“It all depends on that person,” said Soren Seguillon, head of technology practice at JP Morgan Private Bank in San Francisco. “Everyone has a different level of comfort in handling the volatility of a single stock.”
She said most tech founders and CEOs are bullish for their companies and want to hold their interests as long as possible to grow their wealth. At the same time, they usually want to fund other high-tech ventures launched by friends and colleagues. Their borrowing on stocks not only provides cash but also potential tax incentives, but also often allows them to deduct interest on the loan if their income is used for investments.
While some view shared pledges and loans as compounding risk, Seguillon said that if the loan is used to fund external investments, it could become a form of diversification.
“Borrowing to invest in additional or private companies or many assets, a more diverse portfolio, can help build hedges,” she said. “We discuss with our clients how to keep the risks in mind so that they don’t get into the situation where they are being layered.”
When lending to a CEO or founder with a focused position, private banks and asset management companies say they look at the entire client balance sheet, not just their stock positions.
Kurt Niemeyer, head of Merrill Lending Solutions Group, said he offers complex loans to ultra-rich people and that loans to founders or CEOs could include a wide range of collateral, including real estate, art, yachts and more.
“The bigger loans are focused on the overall balance sheet,” he said.
