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I always find it strange that the “wealth” of people like Larry Ellison is based on the public market price of their companies. He owns 42% or Oracle, and so th

I always find it strange that the “wealth” of people like Larry Ellison is based on the public market price of their companies. He owns 42% or Oracle, and so there is no way that he could realise that value at current market rates. Oracle has more debt than it has assets, and a significant proportion of that debt has been used to implement a stock buy back, putting cash in Larry’s pocket and increasing his ownership share of the company, and therefore his nominal wealth. If the company can keep borrowing it could buy back more of the stock giving him majority ownership of a company that would technically be worth less than nothing, and become the richest man in the world. Wizardry! (I know that’s not how valuation of companies like this works, but even so…)

chii 3y ago
The debt is collaterallised on the assets of the company. The debt servicing will require income which, which would have been taxed, except that payment of interest is pretax. Therefore, the buyback is beneficial because of the tax savings.
blibble 3y ago
according to yahoo finance the company has a 10 day volume of 16.7 million shares with 2.7 billion shares outstanding if larry has 1.1 billion shares it would take a few months to unwind that position without much market impact if he wanted it done faster he would have to pay more though
- darzu 3y ago
  Do u really think the price would stay stable while the CEO sells of his whole stake?
  - bionsystem 3y ago
    He would have to sell slowly to get liquidity at a stable price. Which means he would have to file some forms that says he is selling before he can finish, which means he would have to come up with a narrative that's convincing the market that the company is still worth market price. I'd say It's not impossible but quite unlikely that he can sell it all at current market price.
  - fatfingerd 3y ago
    Given the right market and regulatory timing, I think an acquisition by one of the largest US techs could pass and be for a bit more than the stock price, though it would probably at least partially be in the merged stock that he would still have to unwind.
  - devoutsalsa 3y ago
    Not specifically talking about Larry, but large blocks of stock are purchased all the time by a private investor. If someone likes the share price of Oracle times the number of shares owned by Ellison, they could wire Larry the money and he offloads the shares in a single transaction.

chii 3y ago

The debt is collaterallised on the assets of the company. The debt servicing will require income which, which would have been taxed, except that payment of interest is pretax. Therefore, the buyback is beneficial because of the tax savings.

blibble 3y ago

according to yahoo finance the company has a 10 day volume of 16.7 million shares with 2.7 billion shares outstanding if larry has 1.1 billion shares it would take a few months to unwind that position without much market impact if he wanted it done faster he would have to pay more though

darzu 3y ago
Do u really think the price would stay stable while the CEO sells of his whole stake?
- bionsystem 3y ago
  He would have to sell slowly to get liquidity at a stable price. Which means he would have to file some forms that says he is selling before he can finish, which means he would have to come up with a narrative that's convincing the market that the company is still worth market price. I'd say It's not impossible but quite unlikely that he can sell it all at current market price.
- fatfingerd 3y ago
  Given the right market and regulatory timing, I think an acquisition by one of the largest US techs could pass and be for a bit more than the stock price, though it would probably at least partially be in the merged stock that he would still have to unwind.
- devoutsalsa 3y ago
  Not specifically talking about Larry, but large blocks of stock are purchased all the time by a private investor. If someone likes the share price of Oracle times the number of shares owned by Ellison, they could wire Larry the money and he offloads the shares in a single transaction.