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Lockup eased on insider shares

Unusual move to once again test Google's appeal

SAN FRANCISCO -- Google Inc.'s employees and other insiders will be free to sell an additional 4.67 million shares of the company's stock today, providing another test of the online search engine's popularity with investors.

The Google shares eligible to begin trading today represent the first in several waves of insider stock that could hit the market during the next few months.

The Mountain View, Calif. company is lifting selling restrictions on 39.1 million additional shares in mid-November, 24.9 million more shares in mid-December, and another 24.9 million shares in mid-January.

The release of so much insider stock so soon marks another unusual twist in Google's unconventional initial public offering. After completing an IPO, most companies forbid employees and other pre-IPO stockholders from selling their shares for the first six to nine months after the deal is priced.

This so-called lockup period is designed to minimize the chances that the selling pressure becomes so overwhelming that a stock's price plunges dramatically, hurting the investors who bought at the IPO price or during the first few days of trading.

A company's employees and pre-IPO shareholders are usually eager to sell shares because the trading price is typically way above their ownership cost. Many of Google's employees hold stock options priced under $6 per share and have been waiting for years for a chance to cash in.

By allowing its nearly 2,300 employees to cash in on the IPO more quickly than usual, Google is betting investor interest will be robust enough to support the stock price. The decision also reflects management's confidence that employees will hold on to much of the stock, expecting the shares to become even more valuable.

Google already miscalculated the initial demand for its stock. After filing plans to sell 25.7 million shares in its IPO, the company reduced the deal's total to 19.6 million shares. The unexpectedly weak demand also prompted Google to lower its IPO price to $85 per share, far below the company's hopes of fetching as much as $135.

The company has already warned investors that its decision to lift the stock selling restrictions earlier than usual poses a substantial risk. "If these additional shares are sold, or if it is perceived that they will be sold, in the public market, the trading price could decline," Google noted in its final IPO prospectus.

The company's stock has been slumping in the past week after soaring from its IPO price.

Google declined to comment yesterday about the expiration of the first lockup period, citing securities regulations that limit what a company can say publicly.

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