6 ms·

Eric Schmidt to Sell $335 Million of His Google Shares

51 points by mjfern 16y ago

latch 16y ago
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.
alphaoverlord 16y ago
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 16y ago
  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?
  - InclinedPlane 16y ago
    It's a little different if you're the founder, CEO, ex-CEO, etc. I don't think it's crazy for officers to sell some of their stock, you've got to convert what you built into cash at some point I suppose. Massive sell-offs are a red flag, but this is only about 6% of his shares, which shouldn't be concerning, especially with Google's sound financial fundamentals.
  - hessenwolf 16y ago
    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 16y ago
      Don't forget Enron.
  - yummyfajitas 16y ago
    In fact, there is a fairly straightforward formula for determining how much you should put in. Unless you are 100% confident, it isn't 100%. http://en.wikipedia.org/wiki/Kelly_criterion http://en.wikipedia.org/wiki/Kelly_criterion Most likely, Eric Schmidt (and most founders/CEOs of big companies) have far more invested in their company than the Kelly Criterion would dictate.
- hdctambien 16y ago
  Doesn't Eric pay himself $1? He probably has to sell some amount of stocks every once and a while to pay the bills or invest in an asset that creates the cash flow to pay the bills.
- chollida1 16y ago
  > 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). It's also reasonable only if Eric Schmidt thinks there is even the slightest chance that Google's shares will go down at all. This is almost a certainty. Almost all shares go down in price at some time.
aaronbrethorst 16y ago
Interesting timing, to say the least...
- notahacker 16y ago
  Sensible timing... can't see it raising as many alarm bells as if he did it at any other time.
btilly 16y ago
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.
- MikeCapone 16y ago
  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...
  - asdfj843lkdjs 16y ago
    They are going to spend the company's cash reserve buying back stock and artificial restrict supply which will raise the price?
    - MikeCapone 16y ago
      Stock buybacks are just a way to return capital to shareholders at a lower tax rate than dividends. You just reduce the number of slices of the pie, so that each slice is a little bigger. There's nothing nefarious about it, it's one of many valid ways to allocate capital as long as they buy the shares at fair valuation (or better, when they are undervalued). You usually do that if you wouldn't get a higher return by putting that money to work somewhere else.
    - byrneseyeview 16y ago
      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.
cloneofsnake 16y ago
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 16y ago
  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 16y ago
    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 16y ago
      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.
      - robryan 16y ago
        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
elvirs 16y ago
Wow that's a shitload of money, but he did a great work during the decade of being CEO.
napierzaza 16y ago
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 16y ago
  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.
curtisspope 16y ago
see my post yesterday...
hyperlexic 16y ago
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'
steveplace 16y ago
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.
phlux 16y ago
With 335MM, you can spend 31K every single day for the next 30 years.

51 points by mjfern 16y ago

latch 16y ago

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.

alphaoverlord 16y ago

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 16y ago
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?
- InclinedPlane 16y ago
  It's a little different if you're the founder, CEO, ex-CEO, etc. I don't think it's crazy for officers to sell some of their stock, you've got to convert what you built into cash at some point I suppose. Massive sell-offs are a red flag, but this is only about 6% of his shares, which shouldn't be concerning, especially with Google's sound financial fundamentals.
- hessenwolf 16y ago
  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 16y ago
    Don't forget Enron.
- yummyfajitas 16y ago
  In fact, there is a fairly straightforward formula for determining how much you should put in. Unless you are 100% confident, it isn't 100%. http://en.wikipedia.org/wiki/Kelly_criterion http://en.wikipedia.org/wiki/Kelly_criterion Most likely, Eric Schmidt (and most founders/CEOs of big companies) have far more invested in their company than the Kelly Criterion would dictate.
hdctambien 16y ago
Doesn't Eric pay himself $1? He probably has to sell some amount of stocks every once and a while to pay the bills or invest in an asset that creates the cash flow to pay the bills.
chollida1 16y ago
> 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). It's also reasonable only if Eric Schmidt thinks there is even the slightest chance that Google's shares will go down at all. This is almost a certainty. Almost all shares go down in price at some time.

aaronbrethorst 16y ago

Interesting timing, to say the least...

notahacker 16y ago
Sensible timing... can't see it raising as many alarm bells as if he did it at any other time.

btilly 16y ago

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.

MikeCapone 16y ago
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...
- asdfj843lkdjs 16y ago
  They are going to spend the company's cash reserve buying back stock and artificial restrict supply which will raise the price?
  - MikeCapone 16y ago
    Stock buybacks are just a way to return capital to shareholders at a lower tax rate than dividends. You just reduce the number of slices of the pie, so that each slice is a little bigger. There's nothing nefarious about it, it's one of many valid ways to allocate capital as long as they buy the shares at fair valuation (or better, when they are undervalued). You usually do that if you wouldn't get a higher return by putting that money to work somewhere else.
  - byrneseyeview 16y ago
    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.

cloneofsnake 16y ago

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 16y ago
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 16y ago
  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 16y ago
    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.
    - robryan 16y ago
      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

elvirs 16y ago

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

napierzaza 16y ago

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 16y ago
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.

curtisspope 16y ago

see my post yesterday...

hyperlexic 16y ago

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'

steveplace 16y ago

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.

phlux 16y ago

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