Friday, March 31, 2006

I am not a sophisticated investor.

I am not a sophisticated investor. I have common sense though.

Google's founders are doing something most investors only talk about doing:

They are buying low and selling high.

They are issuing $2B in stock.

If I were a sophisticated investor I'd say, its to give them more capital to expand and grow and compete and survive.

I am not sophisticated. I apply occum's razor which asserts: the simplest solution is often the best.

They are merely selling their stock when they know it is high.

Google is merely selling their stock while the price is high.


Anonymous Anonymous said...

Maybe they just don't want too much fluctuation in the price from the S&P index funds buying the stock.


Fri Mar 31, 09:50:00 PM EST  
Blogger Greg said...

I really had to think about your comment. Here's what I came up with:

any company that does anything to smooth stock price volatility should be shorted immediately.

A CEO's responsibility is to maximize shareholder value. Any attempt at managing fluctations does not maximize shareholder value, because fluctuations (aka beta) is strictly a measure of standard deviation from the mean of itself and from the mean of market indices and/or competitors. With risk, comes rewards. Fluctuations are GOOD.

The first rule of being an executive is: you manage earnings, and stock price will NEVER manage stock price.

Google is especially in tune with this. They did not even set their own IPO price...they let the market handle it via a Dutch Auction. The founders have taken the stance that they will aggressive grow, and its up to the market to recognize that.

Plus google is in the rapid expansion stage of growth. The founders don't care about price fluctuations. The price SHOULD fluctuate.

Plus google doesnt care if index funds, or any instituations buy their stock. They were forced to go public in the first place. They didnt seek out capital in the public realm, they were forced to. They didnt even give real voting rights to the shares they issued. They don't care about who owns them, because the founders have all the possible say in the structure of the voting structure they designed.

The founders are clearly long term thinkers. Short term thinkers care about words like "fluctuation".

They are merely going about their arrogant way of doing business. They are selling high.

Sun Apr 02, 02:38:00 PM EDT  
Anonymous Anonymous said...

That sounds good and makes since because we aren't talking about the usual company. I do know from personal experience that some companies want to minimize driving the price from trades that are not the general market trades that are made daily. I'll say this though, the timing of the S&P addition is convenient for GOOG if they were planning on this sale prior to knowing they were being added to the index.


Sun Apr 02, 05:46:00 PM EDT  
Blogger Greg said...

I Completely, 100% agree.

....and your comment is EXACTLY what I want this blog to be....a place for me to throw out there what is "eating me"....and get another point of view from my readers.

I like it...I LIKE IT!....thanks JR.

Sun Apr 02, 06:15:00 PM EDT  

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