Subpoena Resistance Hurts Google Stock

imrec writes "Google stock sees a record 8% decline shortly after news concerning the government's request for Google's search logs broke earlier this week." From the article: "'There are potentially concerns that Google could be in the cross-hairs of the Justice Department,' Kessler said. 'Investors are worried about interest rates and inflation and they felt technology stocks like Google, Apple, Yahoo and others were able to withstand these kinds of pressure. But now that ability is in doubt,'"

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Google stock down

[StarCharter]

This is just flat wrong! Google's stock got clipped because the whole market went down. Investors are worried because the price of a barrel of oil went above $68 a barrel, the Nikei exchange tanked, and several Big Names reported shortfalls. Target buy prices from wall street analysts rangfe fromn $480 to $560. I wish I had a couple of million to put into this "flawed" stock! I expect to see Google at $500 before the end of 2006.

Don't be retarded

[HangingChad]

From the article: "'There are potentially concerns that Google could be in the cross-hairs of the Justice Department,' Kessler said.

The whole market got slammed yesterday. Google is way out there in terms of valuation and 8% isn't that much considering.

The "Justice" Dept. didn't just go after Google records, they asked all the major search engines. Google just had the nads to stand up and say no.

That's not going to cause their stock to go down, being over-bought causes a sell off, especially when the rest of the market is taking a header. Google could be selling toxic waste and as long as their earnings stayed up the market would still buy their stock. This is nothing more than another example of an over-reaching administration trying to gather statistics to support the conclusion they started with.

I can't wait 'till November.

Re:Google will ultimately have to bow to sharehold

[A beautiful mind]

You mention shareholders, but as far as I know, the majority of Google stock is in the hands of the founders and the employees.

Anyone got data on this in support/against?

The market tanked, too.

[cbull]

I think it's hard to say Google's decline was due solely to the DoJ inquiry and their refusal to cooperate. The market dropped 213 points yesterday on other fears.

Give Me a Break...

[Comatose51]

The link between the subpena[sp?] and the drop in Google's price is pretty weak. A better answer might be the decline in LiveDoor over in Japan because of securities fraud. Major financial organizations don't buy just a few stocks. They tend to buy quite a few and some do so with heavy leveraging. The collapse of LiveDoor probably jeapardize the liquidity of some of those organizations. To stay afloat they sold off a bunch of other stocks, including Google with its previous $400 valuation. If anyone's interested, read "When Genius Failed" to see a similar scenario like this that happened when Russia defaulted.

Combine that with the Nikkei's drop and higher oil prices, you can see why. Let's not forget people's knee jerk reaction. Also, some people got it on Google not because they believe in its financials or ideas but because they see the price go up and think that more people will pile on -- other people like themselves. They planned on selling as soon as the price start on a major move down. So perhaps the LiveDoor collapse triggered the move. Seeing this, they all tried to sell and thus magnified the change. This kind of thing is very common. Read "The Devil Takes the Hindmost" for some good examples. The phrase means that stock speculators all know that an overpriced stock will come down eventually but they all plan on selling out and handing it off to the next idiot and hopefully the last idiot is the devil. I'm not saying Google is pure speculation but I'm sure some of its buyers were speculators who only looked at the price and nothing else.

In any case, there are much better explanations or theories for the drop than just a little subpena. Anaylsts are not all geniuses, especially the ones that speak to the news media. I mean, if I was a genius and knew what's going on, why would I let other people know? You make money trading because you know or think you know more than the other party.

Google is Horribly Overpriced

[geoffrobinson]

So anything could prick a bubble.

Last I checked it was around 400 a share: http://finance.yahoo.com/q?s=goog [yahoo.com]

And its market capitalization was around 118 billion dollars. That gives them a P/E ratio of around 88 or 89.

To put this in perspective, their market capitalization, which should be around how much money their business is worth, is about 40% of Microsoft's market cap. And Microsoft is a monopoly sitting on $40 billion of cash. Their P/E is in the low 20's.

Re:This is FUD

[zfractal]

Exactly. This has much less to do with the DOJ subpoena, and a lot more to do with how the rest of the market is performing. More specifically, I think it has a lot to do with Yahoo's lower than expected earnings for the last quarter. Just looking up YHOO on Yahoo itself, you'll see most of the related news headlines are about Google [yahoo.com] and are not related to the DOJ subpoena.

Don't forget the Dow drop because of GE...

[Svartalf]

GE missed their earnings mark for 4Q- I watched as the Dow and to a lesser extent, NASDAQ, went into a short freefall at the time of the financials statement from GE. Nearly everything got pasted in the market yesterday.

Bad logic.

[danwesnor]

The NASDAQ got hit for 2.35%, S&P 500 for 1.8%. Big losses across the board, and I'd expect a young tech company with a high PE like Google to get slammed worse than the averages. So I doubt this has anything to do with the DoJ. Typical stock rag reporting. A happened. B happened later. Therefore, B was caused by A.

Google said this when they went public!

[dcollins]

Google specifically warned shareholders when they went public that this sort of short-term action was expected in their stock price. And that's why they set up dual-shares such that public shareholders have practically no say over how the company gets run. So if anyone doesn't like it, tough -- go invest in a company that doesn't keep it's word.

From the NY Times:

Wall Street loves Google, but the feeling isn't mutual.

That is the message permeating nearly every page of the public offering statement that Google Inc., the Web search engine company, filed yesterday. In a frank and provocative statement, the company's leaders argued that companies cannot manage for the long term unless investors and analysts have limited say in the way they are run.

In this, they are responding to a widespread belief that investor pressure for predictable short-term earnings growth led many publicly traded companies to engage in accounting gimmickry and business improprieties in the 1990's. Google says that it will not offer quarterly earnings guidance and that it expects shareholders to understand even if it makes unprofitable short-term investments.

"A management team distracted by a series of short-term targets is as pointless as a dieter stepping on a scale every half-hour," Larry Page, one of Google's co-founders, wrote in a "Letter From the Founders." The letter, which appeared at the front of the statement, was signed by Mr. Page and his fellow founder, Sergey Brin.

Many institutional investors may cheer that attitude. But another part of the company's strategy will draw some criticism. Google aims to insulate its executives somewhat from shareholder demands. The company will have dual classes of stock that will give company insiders much more voting power than public investors to elect directors. The company's disdain for the traditional stock offering process is also evident. Instead of selling a small number of shares at a predetermined price, which often stokes demand for the stock when it begins trading, Google will auction its shares to the highest bidders. In that way, the windfall profits from the offering will go to the company and its private shareholders, not to favored customers chosen by Wall Street investment banks. In its registration statement, Google explicitly warns investors not to buy the offering in the hope of making a short-term profit by flipping their shares.

http://www.uazuay.edu.ec/bibliotecas/conectividad/ Google%20Says%20to%20Investors%20Don't%20Think%20o f%20Flipping.htm [uazuay.edu.ec]

Re:Don't be retarded

[Mattintosh]

Google just had the nads to stand up and say no.

So did AOL, apparently. AOL's response was something along the lines of "Here are our already publically-available usage stats. Enjoy." In other words, AOL also told the government to pound sand. At least, that's what I heard/saw on News Hour last night...

Do what now...?

[faloi]

Why not look at this part of the article:

"The most obvious reason were the mixed earnings results from Yahoo," Standard & Poor's analyst Scott Kessler said of Tuesday's disappointing quarterly earnings report from Yahoo Inc

It's not like Google was the only stock to take a dive, the market was hurting yesterday. The Tokyo stocks have been hurting for the past few days (or at least hurting badly). Sure, there could be fear about the Justice department scrutiny. It could also just be that everythings hurting right now. Correlation does not necessarily mean causation (to butcher a phrase).

Re:Two Words . . .

[timeOday]

And your reliable source for stock market tips is...?

I have a relative who works at Merrill Lynch telling people what stocks to buy. I asked him whether his most successful co-workers made their money following their own advice, or on commissions. The answer was "commissions."

In other words, I agree slashdot investments tips are probably worthless, but so are everyone else's, unless of course they're insiders.

Re:Google should stick to "not being evil"

[freedom_india]

...that business is obligated to follow the laws of such a government.

Sorry. You are grossly mistaken between a Government and the Law.

A Government is ELECTED to UPHOLD the Law of the Land. That is ALL.
A government just governs according to the law.
It is the Laws that MUST be obeyed, not the Government.

Bending to the wishes of the government which misinterprets law or tries to impose new law where none exists is "sucking" up to people in power.

Now go back to school, and this time pay attention to social studies and civics properly instead of worrying about touchdowns and prom dates.

It is indeed a sad day for USA when we think the Government is the law.
Ben Franklin would be turning in his grave.
 

Yahoo is reason for Google drop

[xswl0931]

Slashdot should not report on things the do not understand (the stock market). Yahoo reported earnings that was lower than expected (they missed earnings estimates). The interpretation here is that the market for online advertising (although Yahoo doesn't rely on advertising as much as Google) has slowed. Google was affected as investors believe that rather than Google (who has not released earnings yet) will also be affected by this and also miss their estimates.

Re:Two Words . . .

[jmorris42]

> The lesson I learned in 1999/2000 is that EVERYONE knew that the market could not sustain those levels. But people put
> their money in anyway, because they thought it would go up for a while longer, and they wanted to gamble on getting
> out on time.

And this is exactly why Google is dipping now. Nothing at all to do with the Justice Dept. The moron writing that Reuters story was looking for something to sex up the story a bit and Slashdot bit hook line and sinker. Bottom line, the stock markets in general did a major dip and Google felt it harder than most because it is such a spectulative stock. It's current market value is so imaginary it recalls the heady days of 2000 right before the bubble burst. Since most investors remember losing an assload when that bubble burst they are a little more jittery this time. But not enough since they are still in Google so heavily.

Look, I like Google. If I could have gotten in on the IPO I'd have been there. But by the time mortals were allowed in the price was insane and heading higher. It is priced like it was already as big as Microsoft and poised to grow. Sorry, Microsoft isn't even growing anymore. No company the size of Micorosoft can, not even Google.

> Most bottomed out at about 1/10th their peak value. Most have not gone back up - most have been absolutely flat
> under George W Bush's "growth and jobs inspiring tax cuts" - for 5 years.

Bush has little to do with it. At 1/10 their peak value they are pretty much priced fairly, which is why they aren't going back up all that fast, in fact they now rise based on expected growth. Imagine that. Sorry, Amazon's couple of warehouses just doesn't represent a greater capitalization than Boeing. And even if Amazon sold every book printed neither their revenue stream or likely profits would approach Boeing's. The market finally came to its senses and revalued those Internet stocks that had truly silly valuations.

But since you bring up Shrubbie, I'll just note that normally when the stock market tanks like it did in 2000 the economy does a much bigger nosedive than it did this time, even without an added blow to investor and consumer confidence such as 9/11. So I'd say the prompt application of tax cuts probably saved the day.

> I'm expecting huge drops. Like most Americans who are making payments on a single home, I'll be fucked. 11% drop
> in November. 9% drop in December.

Again, if you bought in one of the insane housing markets (So Cal for instance) you are probably going to get what you deserve. After all, you KNEW it was insane and you bought anyway. But then on the other hand, if you actually plan to live there it really doesn't matter what the paper value is now does it? Heck, it will at least lower your property taxes. And in ten or so years when you are ready to sell the value will probably have recovered a bit.

Re:Two Words . . .

[Glonoinha]

Heck, it will at least lower your property taxes.

Actually, unless they recently changed it - California property taxes are based on the purchase price of the house.
The bubble could pop, a $1.1M stand alone house (1100 sf, 3/2/1) could drop in real value to say ... $400 per square foot (which is still astronomical, but less than half the purchase price) and the home owner is still on the hook for whatever the tax rate is * his purchase price. Even worse, since all the houses around him are being sold for half what he paid, the real estate value in his down drops in half so the tax rate doubles (so in theory the city still gets the same amount of money) - now he is paying twice in taxes what he was, on a house worth half what he paid for it.

So not only fucked, but double fucked. And even worse than that if he has to sell it, because he will be $400k in the hole.