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Unlocking Google

Posted By Barry Ritholtz On November 22, 2004 @ 6:03 am In Markets | Comments Disabled

A large cause of Google’s spectacular rise has been the very small trading float. Very little of the firm’s float actually trades — of the 273.42 million shares outstanding [1], only 22.5 million shares were issued to the public in the IPO. 4.6 million and 39.1 million have since "unlocked," allowing insiders a window to sell their shares. 

And why not? Early investors own the stock much cheaper. Kleiner Perkins recieved a billion dollar windfall when they sold their shares purchased at (brace yourself) 49 cents each [2].   

The WSJ [3] created a terrific chart showing all the subsequent unlockings over the next year. As this supply hit the market, one would expect it to satiate some (or even all) of the demand for Google shares. (Do the math as to what happens after next). 

Click for larger graphic

Wsjgooglechart [4]

Graphic courtesy WSJ [3]

Some common sense might be getting trampled in all the teeth gnashing about Google insiders dumping shares: Larry Page and Sergey Brin own about 33 percent  Google class B common stock (along with CEO Eric Schmidt). Their recent sales will account for less than 20% [2] of their holdings, and free up over $1 Billion each.

Anytime an individual has the opportunity to put aside a billion in cash — and still own a commanding percentage of their company — its a no-brainer.  Bank the money, and there really isn’t anything you cannot do (Fund your own philanthropic organization, own an MLB/NFL/NBA team, collect anything you want, fund your own VC firm). 

This isn’t a matter of greed, as some have insinuated — its simply smart diversification.

Unlocking Google [3]
Wall Street Journal Interactive Online
November 17, 2004


Google insiders selling shares [5]
Founders Page, Brin to sell 7.2 million shares each
Bambi Francisco
CBS.MarketWatch.com, 7:51 PM ET Nov. 19, 2004   


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2004/11/unlocking-google/

URLs in this post:

[1] 273.42 million shares outstanding: http://finance.yahoo.com/q/ks?s=GOOG

[2] 49 cents each: http://cbs.marketwatch.com/news/story.asp?dist=&param=archive&siteid=mktw&guid=%7B63DABD36%2DA3B3%2D4BD9%2D820C%2D8311CDEF8CB9%7D&garden=&minisite=

[3] WSJ: http://online.wsj.com/documents/info-googstck04-frame.html

[4] Image: http://bigpicture.typepad.com/photos/uncategorized/wsjgooglechart.gif

[5] Google insiders selling shares: http://

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