When Will GE File for Bankruptcy?




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ORIGINAL POST

POSTED BY Ed (18 days ago)
https://wolfstreet.com/2018/11/02/what-general-electric-does-to-avoid-question-when-will-ge-file-for-bankruptcy/

https://wolfstreet.com/wp-content/uploads/2018/11/US-General-Electric-shares-2018-11-02-.png

COMMENTS

Ed (11 days ago)
This is What Retail Investors Did with GE This Year as it Plunged

Lured by the siren song of a “buying opportunity” and a fat yield.

GE shares plunged another 10% this morning to a low of $8.15 before recovering a little. They’re now a big step closer to the Financial Criss low of $6.66, which had been the lowest since the early 1990s. And for most of the year, retail investors – as measured by clients of TD Ameritrade – were net buyers of GE and bought the dips, lured by the Wall Street siren song of a “buying opportunity” and a fat dividend yield.

https://wolfstreet.com/wp-content/uploads/2018/11/US-General-Electric-shares-2018-11-09.png

But that sacred dividend was unceremoniously slashed a second time while people were distracted by Halloween, to a penny this time, and the fat dividend yield suddenly is near-nothing. GE, which lost $23 billion in the third quarter based on a huge write-off, is in the process of dismantling itself to deal with its debts and stay alive, after “unlocking value” by blowing and wasting $152 billion in mostly borrowed cash since 2013 on buying back its own shares.

It now is buckling under $263 billion in liabilities, not counting any off-balance-sheet liabilities. Its accounting is being scrutinized by federal authorities, GE disclosed. And there are fears that some unknown unknowns might emerge. GE has been shedding divisions and assets to shrink itself to health, and as it is dismantling itself, there are fewer business units available to generate cashflow to pay for this debt.


This is What Retail Investors Did with GE This Year as it Plunged
by Wolf Richter • Nov 9, 2018 • 5 Comments
Lured by the siren song of a “buying opportunity” and a fat yield.
GE shares plunged another 10% this morning to a low of $8.15 before recovering a little. They’re now a big step closer to the Financial Criss low of $6.66, which had been the lowest since the early 1990s. And for most of the year, retail investors – as measured by clients of TD Ameritrade – were net buyers of GE and bought the dips, lured by the Wall Street siren song of a “buying opportunity” and a fat dividend yield.



But that sacred dividend was unceremoniously slashed a second time while people were distracted by Halloween, to a penny this time, and the fat dividend yield suddenly is near-nothing. GE, which lost $23 billion in the third quarter based on a huge write-off, is in the process of dismantling itself to deal with its debts and stay alive, after “unlocking value” by blowing and wasting $152 billion in mostly borrowed cash since 2013 on buying back its own shares.

It now is buckling under $263 billion in liabilities, not counting any off-balance-sheet liabilities. Its accounting is being scrutinized by federal authorities, GE disclosed. And there are fears that some unknown unknowns might emerge. GE has been shedding divisions and assets to shrink itself to health, and as it is dismantling itself, there are fewer business units available to generate cashflow to pay for this debt.



These liabilities are so huge in comparison to its remaining assets that when the $79 billion in “goodwill” and “other intangible assets” are excluded from its assets, GE is left with what we call “tangible equity” of negative $31 billion. In other words, this former icon of American industrial innovation and strength has been gutted by share buybacks. GE would be OK-ish today, if it had not wasted $152 billion on monstrous share buybacks to “unlock value” to please activist shareholders and Wall Street.

The plunge-du-jour has been triggered by a brutally hype-free note by JPMorgan Chase analyst Steve Tusa, which he accompanied with a cut in his share-price target to $6, the lowest among Wall Street analysts.

The report cited surging liabilities (see above), weakening cash-flow outlook, and lousy Q3 results on “almost all fronts,” including a 33% plunge in revenues at GE’s largest division, its power division. And then this (Bloomberg):

https://wolfstreet.com/2018/11/09/ge-plunges-what-retail-investors-did-with-general-electric/

Ed (8 days ago)
General Electric seeks 'urgent' asset sales to cut debt: CEO
https://www.reuters.com/article/us-ge-debt/general-electric-seeks-urgent-asset-sales-to-cut-debt-ceo-idUSKCN1NH1SO

GE CEO admits regular investors have fled the stock since he cut the dividend to a penny
https://www.cnbc.com/2018/11/12/ge-ceo-admits-regular-investors-have-fled-the-stock-since-he-cut-the-dividend.html

General Electric just plunged, and one chart watcher says the devil's in the details
https://www.cnbc.com/2018/11/12/general-electric-ge-just-plunged-strategist-says-devils-in-details.html

Ed (8 days ago)
General Electric struggles with a “sense of urgency.”
Though shares [GE] have already plunged so much, they nevertheless plunged another 6.9% today to $7.99 a share, after its brand-spanking new outsider CEO, Larry Culp, on the job for only six weeks, got on CNBC and declared boldly and with refreshing straightforwardness what everyone has known for a long time, that after $152 billion of share buybacks since 2013, GE has too much debt.

To avoid a debt restructuring and stay out of bankruptcy court, GE has to sell whatever it can to try to whittle down its debts. This has been the theme for a while. Now the company is doing it with “a sense of urgency,” he said. And he emphasized: “We have options.”

There’s GE’s healthcare business for which GE is considering an IPO, he said. And there’s Baker Hughes, which GE acquired at the worst possible time and needs to sell — on the principle of buy-high-sell-low — to “generate real cash to bring leverage down,” as he said.

But selling cash-flow-producing business units to pay down an overwhelming pile of debt cuts down on cash-flow producing business units the company still has to service the remaining debts. Dismantling an overindebted financialized industrial conglomerate is always ugly.

“It’s tough to play offense with the balance sheet in the shape that it is in,” Culp said. Shares are down 58% from a year ago because investors have figured that out a while ago.

https://wolfstreet.com/2018/11/12/fangman-come-re-unglued-debacles-sinks-goldman-sachs-apple-ge/


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