4 ms·

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 f

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.

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.