Google’s $7.4 Billion Booty


Top Google executives have sold $7.4 billion in stock in the last 18 months, says Bloomberg. That might have played a role in the stock’s recent decline, suggests Mark Gilbert, especially considering no insider has bought a single share of the company in the same period.

By the numbers:

  • Larry Page: $2 billion
  • Sergey Brin: $1.9 billion
  • Omid Kordestani: $1.1 billion
  • Eric Schmidt: $650 million
  • Ram Shriram: $650 million (Director, Investor)
  • David Drummond: $200 million
  • George Reyes: $200 million
  • Jonathan Rosenberg: $200 million

For context, $7.4 billion is the same amount Disney paid for Pixar, the amount of money lost by the world’s airlines in 2005, and the amount of the U.S. House’s May port security bill. It’s also a tenth of the $74 billion TV ad market Google wants to capture.



To be fair, insiders sell stock for a number of reasons that may not be related to a belief that their company isn’t the best place to have their money. However insiders only buy shares in their company for one reason – they think the stock is a good value and will appreciate in price. The fact that there have been no purchases of Google shares by insiders while $7.4 billion worth of shares have been sold is a very bad sign.

Anybody looking at Google from a pure business standpoint has reason to be concerned:

  1. 95%+ of their revenue comes from a single source (AdWords). They have failed miserably to diversify.
  2. Their sole source of revenue potentially has a devastatingly flawed model if click fraud is as high as it appears it could be.
  3. Google’s growth rate in revenues is now less than their growth rate in expenses (they reportedly hired close to 2,000 new employees last quarter alone).
  4. Despite the hype everytime it releases something new, Google has failed to gain traction with the vast majority of its new products (see the recent BusinessWeek discussion of this fact).
  5. Some of their acquisitions on the surface appear to have little synergy with the core business. Recent example: the purchase of a biometrics firm.
  6. Google is making some very poor business decisions. Most notable in my mind is the fact that they’re reportedly considering building their own hardware (chips, servers). This is a huge mistake. This is extremely capital intensive undertaking and will create unncessary expenses. There is absolutely no reason to do this in-house when you can cheaply purchase these things from vendors competing on price in a cut-throat market.

Bottom line: I believe Google is significantly overvalued and within several years we will look back and wonder how it was ever given such outrageous valuations by the market. It is no doubt a great business however there are significant flaws in their business model which create incredible risk going forward. Becoming hugely successful and experiencing rapid growth is only the first part of building a valuable and solid company over the long-term. The second part is managing that growth effectively and I am not impressed with Google management’s handling of the business as they enter this second phase of the company’s existence.


I think you are comparing apples to oranges…when you say “the amount of money lost by the world’s airlines in 2005, and the amount of the U.S. House’s May port security bill. It’s also a tenth of the $74 billion TV ad market Google wants to capture.”

In economics they would say that you are comparing what is called a “stock” with a “flow”… its the same reason that its foolish to say the Bill gates’s worth is more than a GDP of a minor african country…

Gloria White

Google is no Berkshire Hathaway and these guys are no Warren Buffetts. It’s naive to expect anything else from these guys.
If you know Click fraud represents at least 20 to 25% of your revenue(may be more) and there are numerous other problems (at least in the content network-adsense), why wouldn’t they sell?
Pump and dump is alive and kicking and we’ll see (to quote Buffett)’who was swiming naked once the tide goes out’.

Comments are closed.