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, 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.
The WSJ 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
Graphic courtesy WSJ
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% 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.
Wall Street Journal Interactive Online
November 17, 2004
Google insiders selling shares
Founders Page, Brin to sell 7.2 million shares each
CBS.MarketWatch.com, 7:51 PM ET Nov. 19, 2004
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Microsoft Conduct Is Challenged Again
As it pushes to settle other antitrust suits, Microsoft Corp. faces new, potentially damaging allegations about its business conduct in a patent-theft and monopolization case pending in a federal court in Baltimore.
In a court filing unsealed late Monday, a small Silicon Valley software company called Burst.com Inc. alleges that Microsoft routinely destroyed much of its internal e-mail despite the many federal investigations and private suits it has faced in recent years, when it was often under court orders to preserve such communications.
Burst.com, whose early investors included the Irish rock band U2, filed its suit two years ago. It charges that Microsoft used Burst’s digital-media technology in Windows, solving a technical problem that was slowing the acceptance of Internet video. Burst also claims that Microsoft tried to patent the technology after a technical briefing from Burst, and altered Windows so that Burst’s product wouldn’t work. Microsoft denies the charges.