GE proposes 1-8 reverse stock split

The General Electric campus at the foot of Erie Boulevard in Schenectady glows in the fog in this file image.
PHOTOGRAPHER:

The General Electric campus at the foot of Erie Boulevard in Schenectady glows in the fog in this file image.

BOSTON — General Electric is proposing a reverse split that would give its investors one share for every eight shares of common stock they hold.

The company announced the decision Wednesday, and said the move is designed to bring the number of shares outstanding (now 8.76 billion) in line with companies whose market capitalization is comparable to GE’s ($116.2 billion).

Shareholders will vote on the measure at the annual meeting May 4, and GE’s board will decide when to execute the split over the next year, if at all.

Also Wednesday, GE announced it would combine its GE Capital Aviation Services business — which leases and finances aircraft — with AerCap Holdings N.V.

Terms of the GECAS deal include GE receiving $24 billion in cash and 46% stock ownership of the combined company (market value about $6 billion as of Tuesday).

GE intends to use the proceeds of the deal to pay down its debt by about $30 billion.

Along with the money, GE said the transaction would benefit the company by letting it continue to refine its focus on its industrial core — its Power, Renewable Energy, Aviation and Healthcare businesses.

CEO H. Lawrence Culp Jr. said: “This is the right time to further accelerate our transformation. This action will enable us to significantly de-risk GE and continue on our path to being a well-capitalized company.”

When this next drawdown of debt is complete, he said, GE will have paid off more than $70 billion since late 2018.

Investors were not impressed Wednesday. The price per share dropped 5.36%, closing at $13.25 in heavy trading on a day when the S&P 500 as a whole was up 0.6%.

The stock has been battered and buffeted in recent years, with a long decline from more than $32 per share in late 2016 to $12.09 a share the day Culp took over in late 2018.

It has fluctuated repeatedly in his tenure, never more so than in the last 12 months, when it has ranged from $5.48 to $14.42.

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One Comment

Should reverse-stock-splits be allowed? After a reverse-stock-split, a shareholder is left with many fewer shares and a drastically-reduced future dividend.

A stock split is a gift to shareholders; a reverse-stock-split is theft.

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