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I once read that Ellison had very little wealth outside of his Oracle holdings. In fact, that he had borrowed against his stock in order to make the vast majori

I once read that Ellison had very little wealth outside of his Oracle holdings. In fact, that he had borrowed against his stock in order to make the vast majority of his enormous purchases. Does that mean there will be one hell of a fire sale in Hawaii should Oracle hit the skids? And what sort of mind must one have to borrow upwards of a billion dollars rather than just sell some shares?

caladri 14y ago
It's a common financial strategy among the fabulously-wealthy. Selling shares would incur all kinds of taxes, but he can get a line of credit with a reasonable interest rate quite easily, pay no income taxes, and actually deduct the interest he pays from his taxes. So he carries a lot of debt but it's all backed by assets and paying the interest is tolerable. Yes, if that's what he's doing, then in the event that his assets utterly evaporate he'll be in a spot of bother. But it's a pretty well-trod path, and probably some non-trivial portion of his assets are quite stable and reliable and not terribly volatile. I won't pretend to know the precise details of his situation, but living off a line of credit isn't at all uncommon and perhaps isn't even unreasonable (from the perspective of financial self-interest alone) for a person in his position.
- damoncali 14y ago
  Funny, though - Were I in his position, I'd just sell the stock, pay the taxes and own whatever it was I wanted to own. Perhaps that says something about why I am not in his position.
ajb 14y ago
What caladri says, plus it's possible to limit the potential loss by the use of derivatives: http://en.wikipedia.org/wiki/Collar_%28finance%29 http://en.wikipedia.org/wiki/Collar_%28finance%29
adventureful 14y ago
Ellison currently yields $300x million per year just in dividends from his Oracle stake. I'd say he's cash flowin' just fine. Fun side fact: Steve Ballmer earns nearly half a billion dollars every year from dividends via his Microsoft stake.

caladri 14y ago

It's a common financial strategy among the fabulously-wealthy. Selling shares would incur all kinds of taxes, but he can get a line of credit with a reasonable interest rate quite easily, pay no income taxes, and actually deduct the interest he pays from his taxes. So he carries a lot of debt but it's all backed by assets and paying the interest is tolerable. Yes, if that's what he's doing, then in the event that his assets utterly evaporate he'll be in a spot of bother. But it's a pretty well-trod path, and probably some non-trivial portion of his assets are quite stable and reliable and not terribly volatile. I won't pretend to know the precise details of his situation, but living off a line of credit isn't at all uncommon and perhaps isn't even unreasonable (from the perspective of financial self-interest alone) for a person in his position.

damoncali 14y ago
Funny, though - Were I in his position, I'd just sell the stock, pay the taxes and own whatever it was I wanted to own. Perhaps that says something about why I am not in his position.

ajb 14y ago

What caladri says, plus it's possible to limit the potential loss by the use of derivatives: http://en.wikipedia.org/wiki/Collar_%28finance%29 http://en.wikipedia.org/wiki/Collar_%28finance%29

adventureful 14y ago

Ellison currently yields $300x million per year just in dividends from his Oracle stake. I'd say he's cash flowin' just fine. Fun side fact: Steve Ballmer earns nearly half a billion dollars every year from dividends via his Microsoft stake.