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02-28-2006, 11:16 PM

Quote:

Originally Posted by ur my bitch

lol. you have no idea wha they are doing with the money. And I doubt it was because they just figured their stock was overvalued.

Here's a WSJ article which agrees EXACTLY with what I am saying:

Quote:

Google's Stock Sale Mystery Is
Simply Solved: There Are Buyers
August 24, 2005

(See Corrections & Amplifications item below.)

Google's decision to issue $4 billion in new stock has been greeted with surprise and stupefaction by the army of analysts who are overpaid to divine happenings within the Googleplex.

It is an impenetrable mystery, they say. The company already has nearly $3 billion in cash; why does it need more? Are the Googlers planning to build a global wireless network? Dive headlong into Internet telephony? Construct an elevator into space? And why, oh why, the strange numerology -- selling exactly 14,159,265 shares, which every educated 13-year-old recognizes as the digits to the right of the decimal point in the mathematical term pi.

Hello?

Let's try a little test. If I offer you $100,000 for your Honda Civic, how would you respond? Here are your choices:

a) "No, thank you, my checking account is already full."

b) "Maybe, but let me look around first to see if there is another car I'd like to buy."

or

c) "Here are the keys."

If you answered a) or b), you have the makings of a Google analyst.

There is no mystery here, folks. When companies think their stock is undervalued, they buy it back. The Googlers are in the opposite fix. Their stock is overvalued, so what do they do?

Sell more. Quickly. Before sanity returns to the marketplace.

Now I know there are a number of hypothetically smart people out there who think that at $285 a share, Google still is a bargain. Some were quoted in the pages of my favorite newspaper last week. "We think it's extremely cheap at this level," said Jason Schrotberger of Turner Investment Partners Inc.

But it is a credit to Larry Page, Sergey Brin and Eric Schmidt, the trio who run Google, that they aren't drinking this intoxicating Kool-Aid. It is always hardest to recognize a bubble when you are being lifted by it. But the Google boys seem to have gotten the message.

How do I know? Well it certainly isn't because they have told me, or anyone else -- that would be a breach of fiduciary duty to their current shareholders. But watch what they do, not what they say.

In recent months, the top Googlers have sold off nearly $3 billion of their own holdings. These insider sales all have been on the up and up, conducted under a so-called 10b5-1 plan that allows them to sell a predetermined number of shares over a given period. Diversifying their riches in this way would be a wise strategy for the Google boys under any circumstances. But it is particularly wise if you suspect your stock has a touch of hot air.

They also have been changing their compensation plans, moving away from reliance on stock options, which become worthless if the stock drops. Instead, they have started using Google stock units, or GSUs. That is Googlespeak for restricted stock that takes four years to vest, but will continue to hold value even if the share price swoons. The company issued 61 million GSUs in its second quarter.

If that isn't evidence enough that Google is preparing for the bubble to burst -- or at least deflate a bit -- then the new stock offering should be. The company says it has no specific plans for the cash. "The principal purpose of this offering is to obtain additional capital," Google lawyers wrote in their registration statement with the Securities and Exchange Commission. "We have no current agreements or commitments with respect to any material acquisitions."

Like George Mallory and Mount Everest, they are taking the money "because it's there."

In an earlier age -- think Steve Case and America Online -- the Google boys might have cashed in by swapping their inflated stock for that of a more traditional company -- think Time Warner. While a fool may be born every minute, they don't all make it to the top ranks of corporate power. No savvy chief executive wants to go down as this generation's Gerald Levin. So instead of selling its stock to another company, Google is selling to the public.

None of this is to suggest Google is anything other than a very good company. The Google search has become a central part of modern life -- I did five of them in the course of writing this column. And by linking advertising with search, Google has found a gold mine.

But will revenue from that gold mine continue to increase indefinitely at the 35%-a-year gallop implied by current valuations? I doubt it. More importantly, the Googlers themselves seem to doubt it. And they are smart guys.