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Lockup Expiration

Is it a good thing or a bad thing?

     
4:57 am on Sep 2, 2004 (gmt 0)

10+ Year Member



16.9 million shares were originally sold.

4.7 million shares become eligible for sale Thursday.

By February, a total of 270 million shares will be eligible for sale.

The press seems to make the lockup expiration out as a bad thing. I think it's good. With such a small float currently, there aren't enough shares for institutions to pick up a significant number of shares. Once some of the locked up shares are sold, institutional buys will have a much easier time getting shares. It could be turbulent during the process, but I think GOOG will emerge much stronger afterwards.

12:51 pm on Sep 3, 2004 (gmt 0)

WebmasterWorld Senior Member 10+ Year Member



There was never sufficient demand for all the shares Google wanted to sell at the price they wanted to sell them. The expiration puts more shares on the market. If the traditional rules of supply and demand take over, no increased demand and increased supply will drive down prices.

I don't see any way the expiration will drive up prices, as I don't think more shares available will increase institutional demand. How much prices drop as more shares come on the market is a matter for speculation.

2:23 pm on Sep 4, 2004 (gmt 0)

10+ Year Member



With the way the IPO was structured, most of the shares were limited to individual investors. Individual investors can be very fickle, and will cause a great amount of price instability (both up and down).

I think the institutional demand is out there, and will continue to grow. Different funds have different criteria for stock selection, and GOOG will be picked up by many of them (NASDAQ 100, large cap funds, tech funds, growth funds, etc.) over the next few years.

Also, many of the original holders bought for a quick flip. Once they sell to longer term investors, there will be much less downward pressure.

7:21 pm on Sep 10, 2004 (gmt 0)

10+ Year Member



Last week, I said...
I think the institutional demand is out there, and will continue to grow. Different funds have different criteria for stock selection, and GOOG will be picked up by many of them (NASDAQ 100, large cap funds, tech funds, growth funds, etc.) over the next few years.

And here comes the first big one...

FMR holds 5.2 million shares (15.5%) of GOOG [yahoo.reuters.com]

FMR is Fidelity. With a half a billion dollar investment, they are obviously confident in GOOG.

Expect even more major institutional buying in the weeks and months to come.

1:06 am on Sep 11, 2004 (gmt 0)

WebmasterWorld Senior Member 10+ Year Member



Their filing doesn't say when they purchased the stock. They could have had it from day one.

I appreciate that you believe your prediction to be accurate, but FMR holding a sizable portion of Google doesn't make it so.

Time will tell.

6:39 pm on Sep 20, 2004 (gmt 0)

10+ Year Member



Yet more indications in this article from TheStreet.com [thestreet.com]:

Martin points out that more than a dozen firms will be initiating coverage on Google next week, following the end of the quiet period for IPO underwriters.

The underwriters weren't allowed to publish research for 40 days. Only those who weren't involved have been putting out research so far, which of course has been negative. In about a week, we'll see a bunch of positive research. In the meantime, smart money will be positioning to take advantage of spike that the positive research will likely produce.

Mark Mahaney of American Technology Research says several factors are contributing to Google's recent price rise. One, he says, is that Google is being added to stock indexes.

Just as I said. GOOG will be an important part of many funds.

9:30 pm on Oct 5, 2004 (gmt 0)

10+ Year Member



Yet more Mutual Fund Accumulation [thestreet.com]...

Value shop Legg Mason (LM:NYSE - news - research) said Tuesday it owns almost 13% of Google's (GOOG:Nasdaq - news - research) Class A stock. ... The largest slice of Legg Mason's Google stake is held by its Value Trust fund. That fund, led by value manager Bill Miller, owns 2 million shares, amounting to a 6% stake in Google's Class A stock.

I think it's somewhat comical that their "Value" fund (as opposed to a "Growth" fund) is buying so much GOOG, but it just continues to show my point.

With such a small float, mutual funds cause huge movement in stocks when they buy. These funds are buying anyway. Apparently, they think the risk of missing out is more than the risk of moving the price.

I still think that even more mutual funds will buy once the float increases.

4:39 pm on Nov 10, 2004 (gmt 0)

10+ Year Member



The next lockup expiration is just around the corner. On 11/19, nearly 25 million additional shares become eligible to be sold.

Near Term Volatility Seen For Google [forbes.com]

"We believe much of the current uncertainty will be relieved after the Nov. 18 expiration and expect the stock to be among the strongest performers through year-end."

I tend to agree. With an average daily volume of over 10 million shares, these extra shares are just a drop in the bucket. The November, December, and January lockup expirations will make virtually no difference. The February expiration (176 million shares) might, but if anything, I expect it to stabilize the stock.

I'm seriously considering getting back into GOOG soon, probably with a much larger position than before.

 

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