Larry Ellison meant to raise cash this summer by selling some of his Oracle shares. The money would help his son David buy Warner Bros. Discovery. Then he changed course. In September, Oracle said he scrapped a plan to sell about $7.5 billion of stock. He borrowed against his shares instead.
Margot Patrick's story in Wednesday's Journal traces the loans through California filings. Ellison pledged shares of Oracle (ORCL), Tesla (TSLA), SpaceX and Paramount at five banks. Oracle says 413 million of his shares, worth around $58 billion, now back his personal debts. A year earlier the count was 346 million. His fortune is about $169 billion by Forbes's count, mostly from owning 40% of Oracle. The Journal calls him one of the biggest single borrowers in the world.
Borrowing has a tax edge. Selling stock that has gone up locks in a taxable gain. Borrowing against it doesn't. The very rich have a blunt name for living on loans while they hold their shares, the Journal notes. They call it “buy, borrow and die.”
How the move works
Here's the plain version, in general terms. You keep the stock and borrow cash against it. Cost basis is the price your tax math starts from. Under current federal law, when you die, your heirs usually get a fresh cost basis at that day's value. That's called the step-up in basis. The gain that built up during your life can skip capital-gains tax, and the estate can pay off the loan.
The banks protect themselves. Lenders usually lend about half the market value of a liquid stock like Oracle, the Journal reports. Discounts for a huge single stake can push that to 30% or less. If the stock falls, the cushion shrinks. Oracle fell $3.59 to $125.54 on Thursday, Oct. 22, a day investors fled AI-linked stocks. Oracle's board says it reviews his pledges every quarter and that he can repay without selling them.
Our read
This is an Estate and Tax story with an Investments/Risk (IN04) edge. Our read is that buy, borrow and die is a real tool for people with huge gains. It's still a loan. The interest comes due, and the stock behind it can fall. It works best for someone with cash to cover the interest and room to ride out a drop. Oracle is held at weight in 13 books; nothing added. Ellison's pledges don't change our view of the company.
The same tool shows up on ordinary brokerage statements as a margin loan or a pledged-asset line. If you have one, find the maintenance requirement in the loan terms this week. That's the level where the lender can ask for cash or sell your shares. Then work out how far your biggest holding would have to fall to hit it. If you're sitting on a large gain late in life, ask about the step-up before you sell. You don't check the brakes at the bottom of the hill. If you'd like us to read the loan terms with you, bring the statement.