According to an SEC filing from Friday, February 8th, 2013, Google Inc. (GOOG) Executive Chairman Eric Schmidt, has decided to unload nearly half of his stake in the tech giant. Kent Walker, SVP and General Counsel for Google writes in the report, that this decision to sell shares was determined on November 15, 2012 "as part of his (Schmidt's) long-term strategy for individual asset diversification and liquidity." The entire filing can be found here.
As of December 31, 2012 Schmidt owned nearly 7.6 million shares of common stock, equaling 2.3% of Google's outstanding stock. Schmidt intends to liquidate 3.2 million shares over the course of a year. Schmidt plans to hold his remaining 4.4 million shares until further notice.
No one can expect for a leader of an organization to hold onto their entire portfolio of common stock for their entire tenure with the firm. No one should blame a chairman if they believe time is opportunistic to liquidate assets and diversify their portfolio, but it is fair to question whether or not an executive has the right idea and to begin liquidating their holdings when the stock is at all-time highs.
GOOG Recent Activity
Google has climbed to an all-time high today, February 8th, 2013, closing over $785/share. Google has risen $226 since last summer. This 40% climb over 8 months would sure make most investors happy and would make many consider that the time is now, to cash out for a profit. A chairman knows even more than any other ordinary investor, which should indicate Google should be may be forming a top here.
Other Potential Reasons for the Liquidation
This is more than just a liquidation to pay for a new house or even to start a small project like an investment fund, similar to diversification matters seen in the past by other tech executives like Michael Dell of Dell Inc. (DELL). Selling a stake of this size at current price will net Schmidt a total of over $2.5 Billion. Schmidt will be able to buy a lot with that money, which make investors wonder, where he will be unloading this cash. With $2.5 Billion he will be able to do anything he wants including buying undervalued tech companies, instead of keeping the money with a potentially over valued Google.
Transition? Google may be ready to set in motion a CEO transition period. Often when executives begin to start for the door, they will begin to tie up loose ends, including the long process of liquidating holdings in their firm. Strong firms plan for a successful transition for over 2 years before the CEO steps down. Is this just step one in the plan for Schmidt and Google?
No matter whether Google is seen as overvalued by Schmidt or not, investors will have to keep an eye of the extra 3.2 million shares coming to market in 2013. No, this is not a lot of shares for a liquid firm like Google, who has well above that amount trade in one day, but shareholders should look out for new investors or institutions who begin accumulating large blocks of shares and seek to build voting power and influence, as Schmidt begins to lower is overall power.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.