Capital Markets

Google Founders to Sell Stock over Time

By using 10b5-1 plans, Page and Brin—and executives at a growing number of other companies, too—are shedding insider-trading worries.
Stephen TaubNovember 23, 2004

News that Google Inc. co-founders Larry Page and Sergey Brin each plan to sell a portion of their stock holdings is certainly no surprise. Founders and insiders often unload stock after the lock-up agreement period ends, which is typically several months after a company goes public.

But in a departure from the practice of many other executives at companies that have gone public in recent years, Page and Brin aren’t planning to immediately dump large numbers of shares into the open market.

Rather, they have adopted 10b5-1 trading plans. Such plans, which went into effect four years ago along with Regulation Fair Disclosure (FD), enable corporate officers and directors to adopt written, pre-arranged stock trading plans when they’re not in possession of material, non-public information.

Using the plans, insiders can gradually diversify their investment portfolios and spread stock trades over a period of time regardless of any material, non-public information they may receive after adopting their plans. Transactions under the plans are disclosed publicly through Form 144 and Form 4 filings with the Securities and Exchange Commission.

The big advantages of 10b5-1 plans are that the insiders aren’t subject to blackout periods and are free of worries about whether they’re trading with material, non-public information or appearing to do so.

Under their plan, Page, who serves as Google’s president of products, and Brin, who is its president of technology, each intend to sell about 7.2 million shares. If they complete all planned sales under the trading plans, they will still retain roughly 81.1 percent of their current holdings of Google stock.

Further, Eric Schmidt, Google’s chief executive officer, intends to sell about 2.2 million shares under his Rule 10b5-1 trading plan as a part of an 18-month diversification program. If all planned sales under his trading plans are completed, he will still retain about 84.6 percent of his current holdings of Google stock.

Google, however, is not the only company of late to announce such arrangements.

Earlier this month, Siebel Systems, Inc. said its board chair, Thomas Siebel, has adopted a pre-arranged stock trading plan to sell up to 10 million shares over a year and a half. Some of the shares will be acquired through the exercise of employee stock options, including options set to expire on their 10-year anniversary in March 2006.

The transactions will start no earlier than February 2005 and will be disclosed publicly through filings with the SEC, the company stated. If Siebel completes all the planned sales of shares under his 10b5-1 plan, he would continue to own roughly 45 million shares and vested options, representing about 9 percent of Siebel’s outstanding stock.

Also this month, Xerox Corp said that in 2005, board chair and CEO Anne Mulcahy plans to sell roughly 600,000 common shares, or about 11 percent of the total shares and options she owns, under 10b5-1. Xerox also said that beginning next year, other corporate officers may use the rule to sell shares.

Further, Jonathan Downing, CFO of UCBH Holdings, Inc., a holding company with a $2 billion market cap, said he plans to sell up to 120,000 shares of company stock after exercising stock options. Under his plan, up to 20,000 options may be exercised per month from November 2004 through April 2005.

Similarly, Robert Knutson, chair of Education Management Corp., which has a $2.3 billion market cap, has set up a 10b5-1 plan to sell up to 720,000 shares of common stock during the 12-month period beginning in November. “While this plan is being adopted as part of my on-going desire to diversify my assets, I intend to remain a significant shareholder of the company,” he said in a statement.