
Eric Schmidt to Sell $335 Million of His Google Shares - mjfern
http://mashable.com/2011/01/21/eric-schmidt-google-shares/
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btilly
Ho, hum. Of course they are selling. And will continue to sell. This is
perfectly normal for the big insiders in any successful tech company. Because
of portfolio diversification.

Back when Microsoft dominated the industry every year there would be similar
stories about all of the Microsoft insiders who were selling shares. People
who didn't understand would jump up and down. People who did, would know that
it was entirely expected and a non-story.

In a few years you can expect to hear the same about Facebook.

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MikeCapone
What I've heard from investor-types is that there are 1000s of reasons to sell
shares, and it doesn't mean too much.

But when insiders are _buying_ shares, that can only mean one thing...

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asdfj843lkdjs
They are going to spend the company's cash reserve buying back stock and
artificial restrict supply which will raise the price?

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byrneseyeview
You're thinking of buybacks. That's when the company buys the stock.

Insider buying is when the insiders themselves spend their own money on the
stock. It's very difficult for them to successfully manipulate it upward--if
they buy e.g. 5% of the outstanding shares, then to profit from their
manipulation they have to _sell_ 5% of the outstanding shares. The net result
is likely to be that the stock ends up where it was, and the insiders have
just paid their brokers a lot of money.

Also, what's artificial about this? It seems natural to me that if there are
fewer shares outstanding, the price per share would go up (unless the company
was knowingly buying them back for more than they're really worth). And
"artificial" restriction in supply would be something like paying a group of
shareholders not to sell for a certain period, to reduce the number of
tradable shares. That stuff's usually illegal.

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asdfj843lkdjs
When I say "artificial" what is mean is that if for example a turn-around CEO
and/or team is compensated partly or largely in stock options then they can
decide the best way to raise the stock price is not to grow sales and profits
but to spend the company's cash reserves on a buyback.

Other investors are often supportive of this as it gives them a profitable
exit from the soon to rise stock.

On its own, less supply leading to higher prices is perfectly natural.

~~~
MikeCapone
You seem to be implying that share buybacks aren't a legitimate or ethical way
to use a company's funds.

Imagine that there are 3 partners each owning a 1/3 interest in a firm. If the
firm decides to buy out one of the partners with company money, and that the
partner agrees to this, this leave the other two with a 50% interest in the
company. Nothing wrong with that at all and nobody has been forced to do
anything it doesn't want. It's not artificial, the stock prices are higher
because _each share is now a bigger piece of the comapny_.

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cloneofsnake
Note to Googlers.

If there's one thing I learned from working in Yahoo during its crazy rise in
the early 2000's, it's that you should sell when your founders / CEO sell!

Our stocks were almost doubling every 6 months, we thought we were invincible!
Many of my colleagues joined when Yahoo stocks were at its highest, so they
were holding off for more gain. I was lucky enough to have joined when it was
close to its lowest at $9 a share, so I happily sold some. Boy am I glad I
did.

~~~
hessenwolf
With a p/e of 25, a lot of growth is still priced in, and I see Google's
competition speeding up. 0\. Google's cpc is expensive. 1\. I will happily
spend my advertising on facebook - once I get around to it, this weekend. 2\.
Bing adcenter is cheaper (though astoundingly shit so far - but only working
with it a few days). 3\. I would advertise with duckduckgo in a shot. 4\. I
will give twitter a go too.

~~~
robryan
Good luck getting any better value from Facebook unless your not directly
selling anything. My experience has been Facebook ads cost just as much or
more and convert terribly. Unless your providing something fun to do or
building a brand they seem like bad value.

~~~
hessenwolf
Just put $50.00 on it. They had a recommended cpc of $1.40 - which seems
really, really extravagant. What would you say is the norm? We are newbies at
marketing.

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robryan
it depends who you are targetting i guess, 1.40 sounds very high but prob what
they want for some us targetting? I tried getting specific, going for slightly
cheaper groups and it still recormended like 50 cents. dont know what your ads
are but i didnt find people at all interested ads for products, very low
conversion

~~~
hessenwolf
It's a domain name generator - it's 'mildly' fun. Still in beta testing so not
posting it up on forums or anything. We are getting approximately 15 visitors
a day (since last week), all paid for using google adwords, and largely from
Egypt. CPC is about 5cent, bid set at 20c or something like that.

If I set bing adcenter to decide my bids it goes to $14 - pretty insane. I
think we might push a buck fifty margin once we make our first sale. Exciting
stuff.

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latch
I think the impressive thing about the story is that he'll still own over $5.4
billion in Google shares which represents 2.7% of the company.

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alphaoverlord
I never know what to think of CEOs, founders, and large institutional
shareholders selling a proportion of their stock. Everyone seeks to cite a
benign reason for selling, they wouldn't want to hurt their investment, but
inherently isn't selling a sign of a lack of confidence?

The article cites the idea of diversification - which at face-value seems
harmles - , but is this a lack of confidence in the stock? Diversification
implies to minimize risk, and that is reasonable only if Eric Schmidt thinks
that there is significant risk that Google will underperform market (or at
least his expectation of return in a different investment). Unless he has a
specific purpose in mind with his extra cash-flow, I would imagine this can
only reflect poorly on Google's future expectations.

Here's to hoping that Eric Schmidt only wants to live extravagantly for next
couple of years.

~~~
webwright
Diversification can be prudent and doesn't necessarily reflect lack of
confidence.

Example: pick the stock in your portfolio that you are MOST bullish about. Why
isn't every penny you own in that stock?

~~~
hessenwolf
To agree with your comment, it is as dumb as a bag of hammers to have all of
your savings in the company you work in. You lose your job, and your savings
all in one day! This happened, as far as I know, to an awful lot of Bear
Stearns employees - because it was considered good teamwork to own nothing but
Bear Stearns shares.

~~~
chopsueyar
Don't forget Enron.

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aaronbrethorst
Interesting timing, to say the least...

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notahacker
Sensible timing... can't see it raising as many alarm bells as if he did it at
any other time.

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elvirs
Wow that's a shitload of money, but he did a great work during the decade of
being CEO.

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hyperlexic
when does a major company post huge numbers - only to shitcan their CEO and
bring back a co-founder? there is a lot of damage control in the media, but
companies don't just 'do this sort of thing'

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steveplace
Why is everyone talking about diversification, when this could point to
something altogether?

What if he leaves the company to go work for a competitor, and to own those
shares would reflect a conflict of interest?

I'm looking at you, Steve.

FTA he's not cutting a materially significant stake, but it's fun to
speculate.

N.B. Just because insiders are selling shares does not make the stock a sale.
The market's seen record sales from insiders during this entire market rally.

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curtisspope
see my post yesterday...

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napierzaza
For a little "walking around money".

But I imagine it's for liquidity's sake. Why would he think that the thing he
has the most control in would stop being the best thing to invest in? It's
like someone who owns a bagel shop selling some shares to own part of a coffee
shop down the way.

Unless there are things out of Google's control that are coming, which might
change the valuation. Or more importantly, impact their profit potential/share
value increase potential?

~~~
stcredzero
_Why would he think that the thing he has the most control in would stop being
the best thing to invest in?_

Because he knows he's fallible?

 _It's like someone who owns a bagel shop selling some shares to own part of a
coffee shop down the way._

That might actually be a smart move.

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phlux
With 335MM, you can spend 31K every single day for the next 30 years.

