Google Beats Me to the Punch

Just as I was readying a blog posting concerning the $50 jump in Google (GOOG) shares since news hit last week that the Internet search giant would be added to the S&P 500, the company beats me to the punch. I was going to point out that the more than 15 percent jump in Google stock was based solely on index fund buying, and therefore upward pressure would likely dry up next week. I was even considering a small short trade in my personal account. Looks like Google beat me to the “sell” button.

Wednesday afternoon we hear that they plan to sell 5.3 million shares of stock, in part to accommodate index fund demand. Don’t let this announcement fool you. These Google guys (and gals) are very smart. What better time to announce a big share offering than right after your stock has moved up more than 50 points without any fundamental change in business prospects?

Whether the offering halts the S&P 500 related rise or not we’ll just have to wait and see, but don’t think for a second this announcement is coming out of the goodness of Google’s heart to help some index fund managers out with extra shares. They’re just looking to cash in on the S&P 500 inclusion like everybody else.

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One Thought on “Google Beats Me to the Punch

  1. Andy Kern on March 30, 2006 at 9:12 AM said:

    The Google guys definitely know what they are doing. The company isn’t in need of new capital is it? They generated close to a billion in free cash flow last year alone and have no debt to retire. Seems to me they realize the stock is overvalued and are just cashing in before it falls back to where it more appropriately should be. There is a lot of talk about dilution, but wouldn’t the wise manager keep issuing shares at this price if he knew it was high?

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