The next red flag is the end of that lockup period. Insiders can begin selling shares soon. Once the lockup period is over and insiders can liquidate shares, two things will happen. The first noticeable event is the dilution of the float. More shares available means greater supply, which in turn results in a lower price.
The second and less noticeable impact is loss of talent and lower productivity. Let's face it, when a group of people become rich, some will lose their motivation to come in and grind it out every day. Each environment is different, making the impact an unknown variable. For most organizations, the impact is small because they plan on it. It's the outside forces that are a greater concern.
It's a mistake to discount Google (GOOG) and Google's entry into the social space.
Google is the undisputed czar in online advertising. It knows how to sell ads online. If there is a way to profit from social media, you can count on Google grabbing market share.If you have any questions about Google's ability to take on a market leader, just ask Yahoo (YHOO) and Research In Motion (RIMM) how their market leadership fared after Google stepped into the ring. Yahoo was sent to the back of the class but RIM was taken to the woodshed. Google does a very good job, but it didn't rise to the top because it is great. Google rose to the top because others failed. For example, Yahoo still to this day doesn't have a simple method to display and buy Yahoo ads. Why not? With RIM, I could go on all day. For business people, holding a BlackBerry was a status symbol, a demonstration that whatever you do it's important enough that you need one. A BlackBerry still sends a message about your status, only it's not a status you want to articulate. RIM's and Yahoo's fate wasn't sealed overnight. RIM was provided ample notice that power-users wanted a larger screen, a camera and other features. Yahoo failed in providing a friendly ad interface in the way Google provides users.