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RETHINKING GOOGLE

HAVING TROUBLE PRINTING?
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Attention: Play

I just came across some news that makes our Google play somewhat less desirable. Therefore, for safety's sake, I'm not going put it on as a CPTI trade. Here's the article:
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BOSTON (CNN/Money) - On Feb. 14, 176 million shares of Google stock, which have been locked up under the company's complex stock-release program, are scheduled to hit the market. As economists never tire of pointing out, more supply without more demand means that the price will drop.

On the eve of this date, the question potential investors -- and short-term Google holders -- must ask is this: Is Google's foundation in the market strong enough to withstand this flood, or will it groan and collapse under the weight?

The 176 million shares represent 65 percent of the total outstanding shares, and they will more than double the current float of 127.7 million shares. This offering will be the fifth post-IPO release from Google, and by far the largest.

According to Janco Partners analyst Martin Pyykkonen, in this stage of the game, typically 20 percent of the shares freed up by a post-IPO lockup expiration are sold. But Google's IPO and post-IPO process have been anything but typical. IPOs usually have 180-day lockup periods, "but it's rarely as much of the total outstanding share percentage as this one," Pyykkonen says.

Turbulence ahead?

Google's average daily volume is 10.8 million shares. If just 20 percent of the 176 million shares are in fact sold, that will equate to roughly three times the normal trading volume.
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With this kind of news, we'll scratch the play for now. There's no sense in putting ourselves in harm's way. That doesn't mean we won't re-examine GOOG after the smoke has cleared.

Take care and trade smart!

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