Google under threat from shares glut

SUPPLY-and-demand pressures could send internet search engine giant Google plunging on Nasdaq today, with millions of shares flooding the market as their lock-up period ends just 15 days after the listing.

Lock-up periods are designed to stop insiders selling their shares straight after a float. They usually last at least 180 days but insiders say Google went for a multi-date lock-up so that a potential 270m shares would not be dumped on the market 180 days after the IPO. A total of 4.6m shares were set to be freed up today.

Google acknowledged to the US Securities and Exchange Commission before the float that the short lock-up period 'could cause the trading price of our stock to decrease or to be lower than it might be in the absence of those sales or perceptions'.

Lock-up periods can be as long as 360 days and are included in the float prospectus to give would-be investors a feeling of confidence that management would not bale out of the company as soon as they realise they are multimillionaires.

Venture capital companies Sequoia Capital and Kleiner, Perkins, Caulfield & Byers are expected to try to offload shares. They backed away from selling their combined 4.5m shares when the initial price was only $85 (£47.40). The shares are now trading at more than $100.