r/technology • u/OverPotato2322 • 1d ago
Business How Larry Ellison Secured the Loans to Bankroll His Son’s Warner Bros. Bid
https://www.wsj.com/finance/larry-ellison-warner-bros-loans-49918714126
u/hmr0987 23h ago
Curious, what happens if all these corporations and billionaires suddenly can’t afford to make the payments on all the lending that’s gone on?
I just read constantly about debt financing and borrowing. It all is very confusing to me where the money comes from and how they keep the plates spinning.
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u/Dazzling-Cheetah5951 23h ago
They go bankrupt, but in this case, they'd just sell it to a new buyer probably.
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u/imaginary_num6er 23h ago
They just borrow from a different Ellison fund paid in Ellison shares for an Ellison company
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u/j_j-j_jr_shabadoo 23h ago
"If you owe your bank a hundred pounds, you have a problem. But if you owe a million, it has.” - John Maynard Keynes
If a person or an entity becomes sufficiently rich enough, the rules of finance that apply to little people effectively no longer apply, as their creditors can not afford to simply write off their debt, and if the creditors become insolvent, the financial system collapses, and the government can not allow the financial system to collapse (or at least so they say, a government not controlled by the ultra-wealthy might take a different interpretation), so it becomes the obligation of the public, not the ultra-wealthy entitiy themselves to rescue themselves from their debts, so instead of going bankrupt they get bailed out.
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u/Jaideco 20h ago
If they cannot pay, they default and the creditors can seize their assets to try to cover their liabilities. In this case however those assets are Larry Ellison’s holdings in companies that have gone big on AI. My prediction is that the Trump account scheme is going to turn out to be a way to use taxpayer money to keep pumping his friend’s stock so that those businesses do not fail and Ellison doesn’t lose control.
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u/SirkutBored 23h ago
it is a house of cards based on borrowing against the value of something that you hope doesn't go down. you can lose money on something you buy with borrowed money but it's not as big of a deal as the value of what you borrowed against dropping. so if you borrow money against a single bitcoin, say 70k, and buy some stock and then bitcoin drops below 70k then you could get something like a margin call where you'll have to put up more bitcoin to secure against the loan. if you don't have more bitcoin then you'll have to sell the stock, even at a loss, to start paying that money back. at scale if you have a really large number of shares then selling those shares will make the value drop losing more money and providing less to repay the loan.
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u/redfoobar 19h ago
And Ellisons wealth is pretty much fully tied up in Oracle shares (he owns 40% of the shares!) which are not doing great due to overstretching in AI buildouts. A margin call would absolutely massacre Oracle stocks.
Banks are probably hesitant to margin call due to this but if just one lender goes for a margin call it’s going to escalate quickly and suddenly.
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u/cyclemonster 11h ago
Larry gets over $2 billion a year in dividends from those shares. He can definitely afford to finance an enormous amount of debt just using the investment income from those shares.
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u/No_Mercy_4_Potatoes 23h ago
The US government will do what it always does..... Bail out the billionaires
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u/KingMario05 22h ago
Shh! Don't give Donald ideas!
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u/makemeking706 7h ago
The funny thing is that, based on everything we know about the selfish narcissist, he might not bail them out.
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u/Konker101 21h ago
They start selling their assets. Just like when they die, all the debt they owe is gonna be paid out
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u/cyclemonster 11h ago
Usually a Chapter 11 reorganization where lenders agree to take a haircut on their lending in exchange for partial ownership of the business.
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u/CardinalM1 22h ago
Paywall. Am I correct in assuming "Saudi Arabia investors"?
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u/KingMario05 21h ago
Partially. The Qataris and Emiratis joined the Saudis, and I think there's some South Korean cash in there too. But yes, Arab
bloodoil cash is how they got this deal over the line. So now they own 38.5% of the equity in SKYD. Huzz-aaaaaaaaaah. /s
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u/Pretendiaminvisible 13h ago
Behind the ostensible government sits enthroned an invisible government owing no allegiance and acknowledging no responsibility to the people. To destroy this invisible government, to befoul the unholy alliance between corrupt business and corrupt politics is the first task of the statesmanship of today. Theodore Roosevelt
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u/KingMario05 22h ago
This corporation is speedrunning for bankruptcy if it doesn't immediately move for a fire sale of what it doesn't need. Mark my words. The second the AI bubble pops... Skydance is fucked. And the wreck won't be pretty.
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u/ArmyGoneTeacher 22h ago
Crossing my fingers they complete the speedrun in record time. But assholes always seem to find a way to stick around.
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u/cyclemonster 11h ago
What is the connection between the AI bubble and the things that generate cash for the merged Skydance?
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u/LilPonyBoy69 9h ago
Larry Ellison owns Oracle
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u/cyclemonster 9h ago
So what? The overwhelming majority of Oracle's sales come from enterprise software, databases, services, and cloud infrastructure.
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u/OverPotato2322 5h ago
they are heavily in a partnership with OpenAI and have proposed to build 100 AI data centers (they may NOT collapse or go bankrupt but they will take a larger hit and will have to rebuild and scale back which could take years of doing)
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u/K1ngofnoth1ng 12h ago
Well he asked his buddies in the UAE, and Saudi Royal Families, and Qatar. Funny how republicans HATE Muslims … yet love to take Muslim money, especially when it comes to selling out American media.
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u/ReserveFormal3910 23h ago
Annnd they just cracked down on HBO max subscription. Fuck Ellison.
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u/LinkedInParkPremium 23h ago
What happened?
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u/ReserveFormal3910 22h ago
I just tried to access the account and it asked me to get my own or am I the owner of the account or traveling.
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u/KingMario05 21h ago
Didn't happen to me, but we have a family account. Might change soon.
But hey! The fascists finally fixed the TV app, lmao. So that's something.
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u/no_f-s_given 21h ago
How Daddy Secured the Loans to Bankroll His Spoiled Nepo Baby Son's Warner Bros. Bid
fixed the title
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u/ankerous 8h ago
If you need massive loans to acquire another company, then it shouldn't be allowed to happen.
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u/Immediate-Lynx-5939 18h ago
Before the modern banking system was invented, there was no such thing as public debt. Debt was assigned strictly to individuals, including kings and peasants, and if a king died, his successor might not honor the debt. Public debt allows countries and large corporations to borrow vast sums of money; if something goes wrong, the public pays for it through higher taxation or inflation driven by money printing. At the corporate level, governments often feel forced to bail companies out under the banner of preserving financial system stability. In short, during good times, large corporations keep the profits and the public sees none of it yet during bad times, their losses become everyone's problem, paid for through taxes and inflation.
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u/Caraes_Naur 22h ago
He did it before Skydance's credit rating went all the way to the bottom of the toilet.
They're still paying $15M per day in interest.