Shares of General Electric Co. plunged by as much as 18 percent today, its fourth consecutive day of decline, as investors speculated that more problems lurk at GE Capital, the diversified conglomerate’s financing arm.
Frost & Sullivan analyst Dilip Sarangan said investors are worried about just how much exposure GE Capital has to bad debt and whether it will need to find outside capital to buttress its financial segment.
In a statement posted on the Fairfield, Conn., company’s www.gereports.com Web site, GE denied any need for outside funding.
“This is pure speculation, is inaccurate and is not based on any input from our company.”
GE also said that in the “unexpected event” that GE Capital requires additional equity, “we have a number of options to satisfy that need without seeking external capital.”
But Sarangan said the company needs to be “more open” about GE Financial’s condition.
“How much trouble is it in and how much is it hemorrhaging? How much exposure do they really have to bad debts? What measures are they taking to reduce their exposure to such troubled assets?”
Answering those questions “would reduce the speculation on the company’s prospects,” the analyst said in a telephone interview.
In afternoon trading, shares were down 70 cents, or 10 percent, to $6.31. The stock, which closed Tuesday at $7.01, fell as low as $5.73 earlier in the session — a level not seen since 1991.
Since the beginning of this year, shares have fallen more than 50 percent.
Among reasons for the downdraft are concerns that the Dow Jones industrial average component will lose its top 'AAA' credit rating this year because of GE Capital’s perceived troubles. In addition, the company has slashed its dividend.
In a letter to shareholders Tuesday, Chief Executive Jeffrey Immelt said GE has taken strong steps to protect itself from a recession that is rapidly spreading around the globe and threatening its wide range of businesses, from jet engines to lending.
“GE has enormous and enduring strengths that are underestimated right now,” he wrote.