January 24, 2006 4:00 AM PST
Google co-founders cash in
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That may sound like the ultimate jackpot to most people, but to Sergey Brin and Larry Page it was just another month in their billionaire-in-a-year lives.
Since the search giant went public in August 2004, Brin has sold about 6.5 million shares at a market value of $1.68 billion. Page has sold about 5.8 million shares at a market value of $1.4 billion, according to calculations from Thomson Financial. Chief Executive Eric Schmidt, who was brought in to run the company before it went public, has sold more than 2.1 million shares, worth more than $502 million.
News.context
What's new:
Google's co-founders sold shares of the Internet search giant last month, netting $160 million each.
Bottom line:
The timing and stock price may raise some eye brows, but the sales were scheduled in 2004, and they still own plenty of shares.
Of course, there's nothing new about executives at hot tech outfits getting rich selling their stock once their companies go public. Microsoft's Bill Gates didn't become the richest man in the world because of his take-home salary. And Oracle's Larry Ellison didn't exactly fund his far-flung yachting adventures by cashing in a 401K plan.
But the speed at which the Google bosses have sold their stock and the eye-popping value of the sales have raised some eyebrows among corporate governance experts.
"Any time you sell stock it is an affirmative decision that your assets are better deployed somewhere else," said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. "I just don't think that for the top leadership of a company, large stock sales send a particularly strong message to the other shareholders. I don't think it's a good thing."
He wasn't the only one to take notice, though he was more critical than Wall Street stock analysts who can take comfort in the fact that everyone who invested in Google early on has been amply rewarded by a stock price that has increased nearly 400 percent in 17 months.
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"The insider-selling cases are never a positive for the stock and sometimes they could be red flags," Piper Jaffray analyst Safa Rashtchy wrote in an e-mail response to questions. "(But) by itself, I don't think this sale activity is a major telling point, although it does appear to be quite large and is somewhat concerning."
Not too concerning, apparently. Rashtchy raised his 2006 price target for Google stock to $600 a share from $445 a few weeks ago.
Sales planned long ago
Why the nonchalance? One answer could be that so far there's little reason to think Google's bosses are doing anything unseemly or separating their interests from those of other shareholders. Yes, they've already made a gargantuan amount of money, and stand to make a lot more if Google continues to rebound from a surprising 8.5 percent share price drop on Friday--the biggest single-day drop in the company's brief history. The drop came amid a broader Wall Street decline and one day after it became public that Google is fighting a Justice Department request for random search data.
But the Googlers' stock sales were carefully planned before the search giant went public. Unlike insider sales that are made by company executives accused of unloading stock right before a suspected downturn, the Google executives' sales were decided long ago. They were coordinated under a schedule that allows insiders to pre-arrange the sale of a certain number of shares over a period of time.
The plan, called a 10b5-1, allows them to sell stock on a regular basis without appearing as though they are reacting to market movements up or down. When they announced that they were adopting the plan in 2004, Google said that after the sales were completed Brin and Page would each retain more than 80 percent of their current holdings and Schmidt would retain nearly 85 percent.
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Take one investment course, please. You must always diversify to protect your assets. Selling the stock does not necessarily have anything to do with the owners future assessment of the company. Any competent financial adviser would insist on diversification as soon as possible.
I guess the University of Deleare doen't have a business school?
need some cash!