Tech

Larry Ellison is helping Elon Musk spur demand for new Tesla stock with 'token purchase,' says researcher

Key Points
  • Billionaire Tesla board member Larry Ellison will invest up to $1 million in the company's new $2 billion common stock offering, the company said on Thursday.
  • The purchase amounts to "pocket change" for Ellison, whose net worth tops $62 billion, according to InsiderScore Director of Research Ben Silverman.
  • Ellison disclosed his ownership of 3 million shares in Tesla at the end of 2018 before joining the board.
Larry Ellison, co-founder and chairman of Oracle Corp., speaks during the Oracle OpenWorld 2017 conference in San Francisco on October 3, 2017.
David Paul Morris | Bloomberg | Getty Images

Billionaire Larry Ellison's promise to buy up to $1 million in Tesla's new $2 billion common stock offering amounts to "pocket change" for the Tesla board member in what is essentially a publicity move, according to one researcher.

"The $1 million buy is a token purchase for him," said Ben Silverman, director of research at InsiderScore. "There's few people in the world you could say $1 million is literally pocket change, and Ellison would be one of those."

Ellison, who founded Oracle, has a net worth of $62.5 billion, according to the Bloomberg Billionaires Index.That means even a full $1 million investment in the offering would be far less than half a percent of his fortune, the equivalent of less than $2 for someone with a net worth of $100,000.

Shares of Tesla fell as much as 6% before the markets opened Thursday, but the stock reversed some of its losses after analysts praised the offering as a way to potentially fuel future investments.

Silverman said that for both Ellison and CEO Elon Musk, who said he'd buy up to $10 million in the stock offering, "these investments are not meaningful dollar amounts, so I'm viewing their participation in the offering as public relations more than anything."

Representatives for Ellison and Tesla were not immediately available to comment.

Ellison disclosed his ownership of 3 million shares of Tesla when he joined the company's board in December 2018. It's unclear at what price he purchased the shares, but Tesla said Ellison bought them earlier in 2018, meaning he likely bought them priced around $350 or below. As of Thursday morning, Tesla's stock price sits around $765, meaning his investment would likely stretch about half as far today as when he originally purchased his shares.

"In order for him to move the needle on his holdings ... he'd really have to buy a lot of stock at this price," Silverman said.

Ellison has spoken highly about Tesla in the past, saying he believes the stock "has a lot of upside." He's spoken confidently about Musk's ability to steer the company as well, saying at an October 2018 analyst meeting, touting his ability to land rockets on boats in the ocean through his separate company, SpaceX. "And you're saying he doesn't know what he's doing. Well, who else is landing rockets? You ever land a rocket on a robot drone? Who are you?"

Musk has historically bought common stock in Tesla's offerings, though his commitment to buying up to $10 million is significantly lower than past purchases. He bought $100 million worth of shares around $92 in 2013, which was roughly half a public offering and half private placement, according to Silverman's data. Musk bought $20 million worth of shares around $242 in a 2015 offering and $25 million worth of shares around $262 in a 2017 offering, according to Silverman.

Silverman credited the higher stock price as a factor in both Ellison and Musk's relatively small purchases.

"It speaks to the sort of PR nature of the buying," he said.

Correction: This story has been updated to reflect the correct amount Elon Musk invested in past public stock offerings of Tesla.

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