Google Halt Said Prudent by Thornburg, Too Long by Bahl & Gaynor
Google Inc.’s (GOOG) decision to halt its stock for 2 1/2 hours after the premature release of third- quarter results was praised by fund managers who own the company and assailed by a critic of market structure.
Shares in Mountain View, California-based Google tumbled after it reported profit and sales that missed analysts’ estimates, saying the release was filed without authorization by printer R.R. Donnelly & Co. Nasdaq Stock Market’s website shows the trading delay was requested by the company for news pending. Google stock resumed after the search engine operator published a complete report with no change to its financial data.
Trading halts usually last about 30 minutes, according to the Nasdaq website, though there is no set period and the length may be changed after consulting with the company. Delaying Google longer made sense today because there was too much confusion following the release, according to Connor Browne, who oversees more than $2 billion as the Santa Fe, New Mexico- based co-manager of the Thornburg Value Fund.
“Halting it was the right thing to do,” wrote Browne, whose fund owns Google, in an e-mail. “Nobody likes surprises. Initially, no one knew why the release was out early and we were speculating all kinds of potential negative reasons on our trade desk. Turns out it was just an error.”
Robert Madden, a spokesman for Nasdaq OMX, declined to comment.
The halt would have upset investors trying to trade the stock but was the right action, said Peter Jankovskis, co-chief investment officer for Oakbrook Investments in Lisle, Illinois, which manages more than $3 billion including Google. He spoke in a telephone interview.
Stopping trading was “probably a prudent thing,” Jankovskis, whose firm manages more than $3 billion, said in a telephone interview. “It’s giving people the time to digest the information that was leaked and prevent any further decline in the stock.”
Google traded at an average price of $704.43 from when its results were released at 12:30 p.m. in New York and the time of the halt at about 12:51 p.m. That’s down 6.4 percent from the average level of $752.99 prior to the news, data compiled by Bloomberg show. The shares closed at $695 about 40 minutes after being resumed.
More than 4.6 million shares changed hands in 31,520 trades between 12:30 p.m. and the halt, according to data compiled by Bloomberg. The transactions included one for 10,000 shares at just before 12:42 p.m. at $695.75, another for 8,400 shares at $743.76 at 12:33 p.m., one for 8,900 shares at $688.30 at 12:39, and another for 7,200 shares at $705.03 at 12:43 p.m.
Google shares should have started trading sooner and the delay is a hardship for managers who wanted buy after the decline, according to Matt McCormick, who helps oversee $7.3 billion at Cincinnati-based Bahl & Gaynor Inc. He doesn’t own Google stock.
“How is this an efficient market?” McCormick said in a telephone interview. “If I’m a manager and I want to own this stock, I’m not happy, in fact I’m angry. Google is widely held. How would this happen?”
McCormick was a critic of Nasdaq OMX Group Inc.’s handling of Facebook Inc.’s public debut in March, saying investors were “hitting the ‘don’t like’ button” after a design flaw in Nasdaq software delayed the opening.
Third-quarter profit excluding some items was $9.03 a share, Google said in a filing. Excluding sales passed to partner sites, revenue was $11.3 billion. Analysts on average had estimated profit of $10.65 a share on sales of $11.8 billion.
Halting the shares was necessary to keep people from making mistakes, according to Howard Ward, chief investment officer of Growth Equities at Mario Gabelli’s Gamco Investors Inc. in Rye, New York. His firm oversees about $36 billion in client assets.
“You are apt to regret any trading in the stock prior to having all of the information,” Ward said in an e-mail. “It is dangerous to assume anything regarding specific details of releases.”
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