Billionaire Larry Ellison, whose profligate spending once drew the ire of his accountant, has increased the amount of Oracle Corp. stock he’s pledged against personal indebtedness and lines of credit to $9.9 billion.
Ellison, 70, holds 250 million shares of the Redwood City, California-based software maker as collateral, according to the company’s proxy statement released Sept. 23. That compares to 215 million shares last year and 139 million in 2012.
“With interest rates on loans so low right now, would I rather sell some investments I have and give up the return on those, or would I rather get a loan?” Tim Steffen, director of financial planning at Robert W. Baird & Co., said in a phone interview. “And he’s not going to sell his vacation home to go and make another investment.”
Ellison, who has a net worth of $43.1 billion, according to the Bloomberg Billionaires Index, is known for his lavish lifestyle. He built a sprawling Japanese-inspired home in Silicon Valley, scooped up swaths of land in Malibu and, in 2012, purchased Lanai, the sixth-largest Hawaiian island.
He also sponsors the U.S.’s America’s Cup team, which won the sailing competition last year. The catamarans for the race cost about $8 million to build, and Oracle Team USA and its three challengers this year could’ve spent more than $100 million each on their boats, crew, facilities and support staff, Gary Jobson, a sailor who won the Cup in 1977, said last year.
Ellison is stepping down as Oracle chief executive officer to become chairman and chief technology officer. The company named Mark Hurd and Safra Catz, who were previously co-presidents, co-CEOs on Sept. 18.
Deborah Hellinger, a spokeswoman for Oracle, declined to comment on Ellison’s collateralized shares.
“Banks know he’s a good risk, so they’re willing to lend him the money,” Steffen said. “Even though the size of the loan seems big, this is $10 billion on $43 billion. That’s less than 25 percent -- less than your average investor. Is your mortgage less than 25 percent of your net worth?”
Billionaires including Sumner Redstone, the chairman of Viacom Inc., and Tesla Motors Inc. co-founder Elon Musk also use shares to secure personal debt. Musk has pledged at least 10 million Tesla shares as collateral, valued at $2.53 billion as of yesterday’s closing price, according to the company’s proxy statement.
Redstone controls some CBS Corp. and Viacom shares through National Amusements Inc., which owns Showcase Cinemas. Some of those shares are pledged to lenders of a National Amusements subsidiary, according to filings from the two New York-based companies.
Ellison “isn’t doing anything unusual and he wouldn’t have done this if the company was concerned about it,” Steffen said.
Oracle paid Ellison $67.3 million in fiscal 2014, including an option award valued at $65 million, according to the proxy. The company will cut Ellison’s stock-option grant from 7 million shares to 2.25 million in its next fiscal year, according to the filing. The reduction follows two consecutive shareholder rejections of Oracle’s executive pay plan in annual non-binding votes.
Ellison has collected at least $2.1 billion exercising options since 1994, according to data compiled by compensation expert Graef Crystal. In the 20 years ended May 31 this year, Oracle has posted a total return of more than 2,500 percent, almost 2,000 percentage points more than the Standard & Poor’s 500 Index during the same period.
Oracle also is introducing performance-stock units beginning in fiscal 2015. The awards are granted based on the company’s relative revenue and cash-flow growth versus a set of peers that includes International Business Machines Corp. and Hewlett-Packard Co.