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Larry Ellison’s $1 Billion is Better Off Parked in Tesla Than Oracle

Last Updated September 23, 2020 1:30 PM
Mark Emem
Last Updated September 23, 2020 1:30 PM
  • A little over a year since joining Tesla’s board, Larry Ellison’s stake in the electric car maker is up $600 million.
  • The Oracle founder became Tesla’s independent director at a time when the firm was suffering a crisis.
  • With Tesla now up 30%, some analysts are beginning to urge caution.

Oracle (NYSE:ORCL) founder Larry Ellison joined Tesla’s (NASDAQ:TSLA) board in late 2018  to help steady the ship amid an escalating crisis involving Elon Musk. That move has proved to be profitable as well and not just what would be expected of a seasoned entrepreneur when his younger friend is facing fire from all directions  including the U.S. Securities and Exchange Commission.

Just prior to becoming an independent director on the electric car maker’s board, Ellison acquired 3 million shares . Though the SEC filing didn’t reveal the price he bought the stake at, Tesla shares were trading at around $337 at the time. The recent Tesla rally which has seen the stock appreciate by nearly 30% in the first 15 days of this year means Ellison’s stake has gone up by over 60%. The stake which Ellison spent $1 billion to purchase is now worth slightly over $1.6 billion.

Tesla’s gains overtake Oracle’s

That’s not the best part of it for the Oracle founder though. Last year in June, the Oracle founder received 50,000 Tesla shares  as compensation from the electric car maker. At the time of the stock award the shares were trading at roughly $223. This has resulted in a gain of 140%. This particular stock award has also recorded paper profits of nearly $16 million.

Ellison also received another stock award of 8334 shares in January last year. This raises the tally of the total number of shares he holds in Tesla to 3,058,334. The entire stake is now valued at about $1.65 billion.

Compared to the gains Tesla has made, the appreciation Oracle has recorded over the same period pales in comparison. Since December 27th, 2018, when it was reported that Larry Ellison had acquired three million Tesla shares, Oracle has only gone up by 22%.

Oracle stock price chart | Source: TradingView

Oracle’s market cap is currently nearly twice that of Tesla though.

The future looks bright… or is it just the headlights on full?

The rally in Tesla’s shares has come amidst the introduction of new models and an expansion into China. Earlier this month, the electric car firm delivered the first vehicles made in China at its Shanghai Gigafactory. The plant is expected to produce various cars including the Model 3 and later even a Chinese-designed vehicles. Tesla is also expected to release the Model Y crossover later in summer.

The expected increase in revenues has made Tesla bulls increase their bets. Tesla bull and founder of ARK Invest Catherine Wood expects the price of the stock to surge to $6,000 by 2025 .

Source: Twitter 

Not everyone is convinced though. Last week when the stock was trading below $500, Wall Street firm CFRA indicated that the stock was fully valued  while warning investors of short-term pitfalls:

In our view, (Tesla) shares now appear fully valued after a meteoric run-up since bottoming at $177/share last June and are not reflecting various near-term risks.