The National Post had an interesting column by Paul Kedrosky today talking about an eventual drop in the stock of high-flying Internet search engine giant Google (Nasdaq:GOOG).  Paul initially makes the point that the other three high-tech stocks that were flying high came down within the past year (eBay, Yahoo! and Amazon).  eBay, particularly, came down crashing 19% just this past Thursday, lowering its market cap by an amazing $13 billion, just for narrowly missing analyst estimates (33 cents versus 34 cents a share estimated by Wall Street).

Then, the article points out the earnings multiple of 220 times last year's earnings, and some other details highlighted by Mark Evans in his blog article.  Paul does not question the soundness of the ad-centric search business, pointing out that this year is expected to be the first one in which online ad revenue exceeds offline revenue.

But one of the main reasons for Kedrosky's forecasted drop in GOOG shares is the 14 million shares that will be newly tradable in February, and his belief that a substantial portion of those will find their way to the market.  The volume this last Friday was 9.3 million shares, according to Yahoo!, the average volume over the past 3 months has been around 10.8 million (Paul mentioned 6 million shares a day in his article).  But regardless of the daily volume, the new shares will play a significant impact on the sell side, and as the eBay example last week indicates, even a slight slip-up can be enough to cause a major correction.  Arguably, an adjustment already took place, with the stock now trading at $188, down from over $200 at the beginning of the month.