In this weekend’s Linkfest, I referenced a Bloomberg article which looked at all the insider selling at Google and saw a total of $7.4 billion dollars.
While I thought it was a lot of "diversification," I didn’t bother to line up all the numbers. However, John at GMSV did — and let me tell you, seeing the list in black and white was a shocker:
Senior Management Insider Sells (since *Feb. 14, 2005)
Larry Page: $2 billion
Sergey Brin: $1.9 billion
Omid Kordestani: $1.1 billion
Eric Schmidt: $650 million
Ram Shriram: $650 million (Director, Investor)
David Drummond: $200 million
George Reyes: $200 million
Jonathan Rosenberg: $200 million
To put that into context, insiders sold enough to buy almost half of Sun Microsystems (SUNW). Or, they could have bought all of contract mfr Flextronics . . . and or 3/4s of on line broker E*Trade — together. Or, they could have simply purchased ~ 3/4s of Amazon.com — and still had $6 billion left over.
Also noteworthy — despite Google’s stock price retracing about 25% from a high of $475 down to this past Spring’s low under $350, not one of these execs has re-purchased a Google share in 18 months.
GMSV ponder’s the question "Why not? Why are Google insiders scaling back their investments in a company that’s going great guns?"
“Any time you see insiders who are strictly selling, the market has to evaluate that," Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware, told the Financial Times. "If insiders are selling and not buying, it suggests they have found a place where their assets will appreciate somewhere else.”
UPDATE August 22, 2006 8:07 am
David Singer points out the Technicals of this: this is a triangle formation that has been resolved to the downside (which according to the book, is not good) . . .
click for larger chart
>
* 2/14/05 was the expiration date of the last restriction on insider sales
following Google’s IPO.
Sources:
Google’s Own Executives Rate the Shares `Sell’
Mark Gilbert
Bloomberg, Aug. 18 2006
http://tinyurl.com/of2qg
Don’t call it a selloff — we’re just making more Google shares available to small investors
John Paczkowski
GMSV, August 21, 2006
http://blogs.siliconvalley.com/gmsv/2006/08/in_the_past_yea.html
AMZN’s market cap is 11 Billion (418 million shares outstanding) – looks like there’s a math error somewhere.
Barry, the selling is noteworthy for the reasons you cite. Why anyone expects buying here is beyond me. Given the treatment, irrational as it was, that they got when the company IPO’d I would expect zero open market purchases above 200. Their selling indicates they consider the company fairly valued, can’t see them stepping into the open market until they view the stock as dramatically undervalued, as management is still substantially net long. Perhaps someone mentioned the adventures of other CEO’s like the gentleman at MSTR. I seem to recall he was worth 12 billion at the top, and dipped as low as 200 million 2 years later.
Hi Barry,
Just a shout out to Dan Fitzpatrick over on RM for his comments on GOOG’s chart on 7/28/06 and 8/3/06. The last one in particular looks like a good call.
LOL! I sold GOOG the afternoon before last springs dip.
As I was deciding if I should hold or sell for the earnings report, I got an e-mail indicating Mr. Schmidt and a couple others selling shares the afternoon before earnings……. I Sold GOOG at the high and never looked back.
your chart, borrowed or your own, is very liberal in the drawing of the support line within the triangle. if you go thru the march 2006 lows, the chart has yet to be broken and is still indecisive, yet weakening.
BR: As noted in the text above, that chart is from David Singer.
I’m open to looking at another annotated version that shows something different . . . TA is, after all, an art and not a precise science.
Doh! $7.4B, not $17.4B. Damn solar calculator!
(actually, that was an ugly Brain freeze)
Google is one of the stocks I love to hate the most. Technically it is broken and has been broken for some time. I’d say Singer’s perspective is quite accurate and so is yours.
Fundamentally, there are quite a few forces at work here. Since there are few strateegerists or technologists on Wall Street, they likely cannot see far enough into the future to see the flaw with Google’s business model but there are enough people who understand this slowdown is led by the consumer and Google is a B-to-C business. Owning any nonstaple consumer stock will surely lead to bunga bunga. Wait till those corporate execs scale back these pissing in the wind internet marketing budgets which have no clear ROI and no clearly measurable value other than it feels like the right thing to do because everyone is doing it.
I guess that’s how the hippie generation started in the 1960s huh?
Funny but I was looking at the chart yesterday. I’m a little more generous to GOOG in that I draw the lower trendline connecting the 10/05 and 3/06 lows, so they’re still inside triangle as of yesteday’s close (just barely).
But Singer’s way is interesting too, drawing it from the 4/05 low to the 3/06 low he just takes into account a longer trend. And if you look at the volume in Singer’s triangle, it is textbook. Volume declines as the triangle reaches the apex, and it spikes as price breaks down in July.
Anyhow, if GOOG breaks down from that 375 support area to fill the gap to 350 it’s going to do it on heavy volume as stops get taken out. Another textbook triangle.
“Also noteworthy — despite Google’s stock price retracing about 25% from a high of $475 down to this past Spring’s low under $350, not one of these execs has re-purchased a Google share in 18 months.
GMSV ponder’s the question “Why not? Why are Google insiders scaling back their investments in a company that’s going great guns?” ”
Perhaps they have so much freaking Google shares they don’t need anymore? Or they want some diversification? Or they’re cashing in like you or I would do?
OK, I’ve drunken the Google Kool-aide, but a stock growing over it’s P/E multiple with the history of innovation they have is not a bad place to have $$$.
I’d buy it just for it’s big fat divi.
The chart is clearly showing a weakening stock with lower highs. Support around 360 but it doesn’t look strong in light of the trend down since early Jan.
I wouldn’t touch GOOG except as a short/put.
Looks like the Google guys can read charts too, although they were selling before Jan.
Off topic, but wanted to note a great article in this week’s New Yorker about the deteriorating state of pension funds and dependency ratios:
http://www.newyorker.com/fact/content/articles/060828fa_fact
Coupled with the cover of the Sunday Times, which explored the $49 billion underfunding of NYC’s allegedly fully funded pension funds, it’s sobering stuff.
http://www.nytimes.com/2006/08/20/nyregion/20pension.html?_r=1&oref=slogin
Oy.
I’m okay with the triangle. I draw an even more modest symmetrical variety using the all-time high and the March 06 lows as starting points for the converging trendlines. By that measure, the lower support line was broken in late July 06. The size of the pattern projects to 260.
How about that yield curve? It’s now the most inverted since Dec 2000 and starting to scream rate cut.
I think there is also an emotional aspect to these types of insiders selling. Many really believed in fundamentals during the bubble of 2000 and saw their millions go up in smoke. Almost every technology executive I know believes that you sell off a big chunk when you can and put that money in something not correlated to technology equities.
Also with respect to GOOG one can evaluate earnings growth and multiples and make a decision from there.
I would imagine that all these guys sell on a tightly scheduled basis (a 10b5-1 plan) and started doing so when the stock traded around $200. Particularly at the most senior levels, they articulated their plans to sell stock at the time of the IPO and were reasonably vocal about it. I think most of them stopped worrying about increasing their personal wealth some time ago. How long has it been since people stopped looking at Gates’ trades before making a decision about MSFT?
Michael C:
I agree. The FED is 100 basis points too tight.
You may appreciate the following comments from Mark Newton, Morgan Stanley’s technical guru. The quote is cut and pasted from his “Weekly Technical Perspectives” piece dated 8/20/06:
“As a final note, the market seems to be reflecting a severe shift from inflationary to deflationary themes as we near the end of August. This has been reflected in severe selling pressure in both oil and gold, which look to have an above average chance of continuing lower over the next few weeks. Gold’s break of trendline support and Ichimoku cloud support is negative, and might cause a pullback to challenge and breach July lows near $600. Month-end closes beneath 654.60 will officially confirm both TD Sequential™ and TD Combo™ sell signals, which should put additional pressure on Gold, suggesting price deterioration to targets near 500.”
It would be insane for the insiders not to sell. The diversification rule also applies to them!
They probably still have over 90% of their wealth tied to Google. Sell some shares and buy some Berkshire shares makes a lot of sense.
But this will continue for a long time and bring a constant new supply of shares to the market.
Thoughts… It’s just a search engine. Everything that they do (that I’m aware of) is available on the web from other places. These other places pop-up left and right, year after year. Who heard of MySpace or YouTube a few years ago? The main revenue is from “clicks.” Who is clicking on these ads anyways?
I *think* I know how this one is going to end. At least the insiders won’t be broke.
But they do have a good search engine.
Atta boy Craig!!!
(that is what you were looking for, right?)
Hmmmm, I suppose I could share my losses too!
Those are too numerous to list.
Honestly, it was pure luck. I had some other unexpected earnings reports not going my way and was feeling defensive, so I was taking profits and insider sales pushed me over the top on google.
I got a call from Google last year. Short version of an hour-long conversation:
“Hi, want to come work for us?”
“Um, doing what?”
“We don’t know, we just liked your resume and want to hire you. Can you come to San Jose?”
“Um, no. If you open a San Diego office, call me.”
“Oh, ok..”
They got no clue what they’re doing, are hiring people like mad, and are throwing money around all over the place. I know folks who fly in every week from Austin, Texas at Google’s expense. It’s ludicrous.
Yeah, I would be selling if I were them, too.
They will expand and diversify themselves into mediocrity.
Google owns search, but they are going into everything because technically speaking information is information and everything can be searched. Unfortunately, people don’t think in those terms. They don’t think, “Oh, Google does great search therefore the most searchable email account must be a Gmail account, so that’s what I’ll sign up for!”
Google doesn’t own any position outside of search. It looks, however, like they’re trying to create a new position and identity for their company, “Yahoo With A Better User Experience.” In other words, be all over the map but make the websites slick and fast.
Google’s combination of search, Adwords and Adsense is powerful. But Overture & MSN will inevitably announce a deal that makes them together a credible alternative to Adsense & Adwords. An ad buyer, in other words, will be able to buy ads that will be deployed both on the Yahoo/Overture network and the MSN network. If at the same time, Yahoo’s and MSN’s search capabilities improve–Yahoo search is already more or less at par with Google while MSN has a lot of work to do–Google’s ownership of the search position will have proven to be temporary. MSN through its IE which sets a default search engine is in the long run a Google-slayer.