GE An $ 8 stock by December?

[Clone]

November, 2017- GE board member James Tisch disclosed the purchase of nearly $54 million worth of GE stock, becoming the third company insider to buy shares in the past week as prices hovered around six-year lows. Marketwatch

GE shares have tumbled over the last five weeks after the industrial conglomerate reported the first profit miss in 2½ years on Oct. 20, and after new Chief Executive John Flannery’s turnaround plan unveiled Nov. 13 disappointed investors.

But as prices fell, Flannery bought over $1 million worth of stock on Nov. 15, at a price of $18.27. On Monday, GE board member Francisco D’Souza, who is also the CEO of Cognizant Technology Solutions Corp. followed by buying just under $1 million worth of stock.


The C-suite and the board of directors (at some point) must have to face the reality that a massive amount of their wealth has disappeared along with the realization that they are responsible for bringing about that level of destruction. Or maybe it is just a game to them?

 

[Lakewood90712]

...................
In the case of GE, the $24B in share repurchases you point to in 2016 and 2017 could have been used for better purposes, like paying down some of their $115B debt, or some of their mounting pension liability (at $31B at the end of 2016).

https://money.cnn.com/2018/01/18/investing/ge-pension-immelt-breakup/index.html

IMO , management was afraid of admitting that the business had nothing worthwhile to invest in , and unfortunately, used buy-backs to shore up the share price. Pay-down Dept ? The same management assuming interest rates would remain near zero for the foreseeable future. Use the money for a special dividend ? almost never happens.

My financial credentials ? none , just that of an armchair observer.

 

[Lakewood90712]

Breakup value - Most of the talking heads are saying about $11 a share. Just announcement of same should cause a bump in share price.

GE retiree pension plan. same talking heads are saying UNDERFUNDED by 30 billion. that equates to an average of $50,000 per retiree. Is it Unfunded or Underfunded ?

If the company is broken up, what happens to the retirees ? Would the plan be frozen and on it's own like the airline and steel industry pensions ? Could this be legally done if the underfunded part is made whole upon sale of assets ?

 

[ERD50]

Breakup value - Most of the talking heads are saying about $11 a share. Just announcement of same should cause a bump in share price.

GE retiree pension plan. same talking heads are saying UNDERFUNDED by 30 billion. that equates to an average of $50,000 per retiree. Is it Unfunded or Underfunded ?

If the company is broken up, what happens to the retirees ? Would the plan be frozen and on it's own like the airline and steel industry pensions ? Could this be legally done if the underfunded part is made whole upon sale of assets ?

Four letters. PBGC.

https://www.forbes.com/sites/kenkam...-put-in-your-retirement-account/#67415b2f2f22

In the worst case, GE's pension plan would be taken over by the Pension Benefit Guarantee Corp (PBGC). Never heard of them? Here's what their website says:

PBGC is a federal agency created by the Employee Retirement Income Security Act of 1974 (ERISA) to protect pension benefits in private-sector defined benefit plans - the kind that typically pay a set monthly amount at retirement. If your plan ends (this is called "plan termination") without sufficient money to pay all benefits, PBGC's insurance program will pay you the benefit provided by your pension plan up to the limits set by law.

Sounds comforting? However, the key phrase here is, "up to the limits set by law."

For 2016, the maximum benefit for those who retired at age 65 was $60,136 ... .

Looks like pensions are protected up to the current cap, up a bit due to inflation, ~ $65K in 2018. So no problem for anyone except high wage earners, who might get capped.

https://www.pbgc.gov/wr/benefits/guaranteed-benefits/maximum-guarantee

This is the thing with private pensions - they have been paying into PBGC forever, so there are protections. For government pensions, the guarantee is the taxpayer. Pretty sound for Feds, could be shaky depending on the municipality.

-ERD50

 

[Lakewood90712]

Any former directors of GE from the last 5 years or so, on the board(s) of other companies ?...... Doing the same due dilligance they did at GE ?

 

[jazz4cash]

GE closed below $8 today. OP nailed it. Apparently the new CEO interview on CNBC didn’t help, maybe hurt. Former GE now at Blackrock is said to be sniffing around his former employer.
Blackstone sniffing around GE - Fox Business https://seekingalpha.com/news/3408604

 

[Breedlove]

GE is really in bad shape , they are trying to peddle BHGE which they own 64% but the stock is so depressed that GE will lose their shorts on that one . Word is BHGE will follow WFT to junk stock .

 

[Breedlove]

Get ready for bad news tomorrow on GE . Institutions have dropped 196 M after hours Big sales going on right now .

 

[Lakewood90712]

If GE freezes the existing defined benefit plan but does not go BK, and dissolves the company , does PBGC become involved ,? Or will the pension plan participant lawsuits block this?

Does the pension plan become a stand alone entity and PBGC gets involved when the plan can no longer pay currant pensioners ?

 

[ERD50]

If GE freezes the existing defined benefit plan but does not go BK, and dissolves the company , does PBGC become involved ,? Or will the pension plan participant lawsuits block this?

Does the pension plan become a stand alone entity and PBGC gets involved when the plan can no longer pay currant pensioners ?

What is 'dissolve the company' w/o going BK?

PBGC will be involved at all steps. If GE sells off a portion, they need to fund the main part of the company that is responsible for pensions. This happened with my Mega-Corp, the sale of one portion was contingent on adding funds to the pension, so we were actually stronger after the sale.

PBGC doesn't want to be on the hook for anything - they will fight to get as much funding as possible for the pension, then PBGC is only on the hook for the delta.

edit/add: Not sure what you mean by 'freeze' - they can decide (maybe already have), to no longer give any credits towards pensions from that date forward, but all past commitments for current and future pension payments must be met (or the PBGC steps in).

-ERD50

 

[Lakewood90712]

What is 'dissolve the company' w/o going BK?


edit/add: Not sure what you mean by 'freeze' - they can decide (maybe already have), to no longer give any credits towards pensions from that date forward, but all past commitments for current and future pension payments must be met (or the PBGC steps in).

-ERD50

Dissolve the company - a complete breakup selling off all divisions and assets to the highest offers.

Freeze the DB pension plan - like IBM, and others have done.

From what I have read today, GE currently has about 600k retirees drawing a pension, 300k employees, with 200k of those employees outside of the US. Not sure if the pension plan is US only

 

[ERD50]

Dissolve the company - a complete breakup selling off all divisions and assets to the highest offers.

Freeze the DB pension plan - like IBM, and others have done.

From what I have read today, GE currently has about 600k retirees drawing a pension, 300k employees, with 200k of those employees outside of the US. Not sure if the pension plan is US only

As I said, if they sell off divisions, every component that is responsible for pensions (the pensions will likely stay with a 'core' segment of the company) will be subject to, and protected by, PBGC rules.

The term 'freeze' means what exactly? From Forbes:

... in December 2010, GE has closed its retirement fund to new workers. Whereas workers joining GE up till then could look forward to a guaranteed pension, now they will be offered a 401k plan.

Any employees that contributed will get a pension, and maybe are still earning benefits over time (that wasn't covered)? New employees simply don't partake in the plan.

I actually consider that a good thing. You 'own' your 401K, a pension is a promise, with some protections, but promises made decades in advance are hard to count on. Show me the money.

-ERD50

 

[Breedlove]

Well GE is dumping BHGE , if I understand correctly to generate cash flow GE will sell about 10% of their 63% of BHGE. Kind of sad BHGE is around 24.00 and GE gave 41.00 . looks real desperate .
I guess they needed money for the big shots Christmas party and bonus's

 

[38Chevy454]

Well GE is dumping BHGE , if I understand correctly to generate cash flow GE will sell about 10% of their 63% of BHGE. Kind of sad BHGE is around 24.00 and GE gave 41.00 . looks real desperate .
I guess they needed money for the big shots Christmas party and bonus's

Buy high, sell low. Not exactly a long term success strategy.

 

[bobandsherry]

Well GE is dumping BHGE , if I understand correctly to generate cash flow GE will sell about 10% of their 63% of BHGE. Kind of sad BHGE is around 24.00 and GE gave 41.00 . looks real desperate .
I guess they needed money for the big shots Christmas party and bonus's

Just shows that even the "experts" don't always get it right - but DAMN!

 

[GrayHare]

If this continues much longer, Buffett will step in and get a sweet deal.

 

[Lakewood90712]

Un confirmed report GE will use the BHGE sale proceeds to buyback GE shares on the open market.

 

[Breedlove]

So what does this mean that GE stock will go up because of the buyback ?

 

[bobandsherry]

Un confirmed report GE will use the BHGE sale proceeds to buyback GE shares on the open market.

Just saw news story that confirmed that....

GE said it would sell up to 101.2M*BHGE shares on the open market and that BHGE would buy 65M of its own shares from GE; after the sale, analysts say GE will own ~50.4% of BHGE, vs. 62.5% currently.


And this further. ...


While the stock rallies today,*GE bonds are falling sharply; the price of GE’s widely traded 4.4% bond due 2035 are ~2.5% lower to $0.81 on the dollar in heavy trading, as the higher implied borrowing cost reflects bond investors’ fears about GE’s dwindling cash.

 

[Running_Man]

The problem I have with buying back shares of a company is it accomplishes nothing for the company - it is a complete and total waste of resources. What it does accomplish is to provide a market for the stock and have the stock trade at a higher level than it would be trading without the share buyback, thereby increasing management stock options and stock holdings to perform better than they would do in the absence of the buyback.

GE as recently as 18 months ago GE was still planning to sell assets to buy more shares while borrowing to pay the dividend. There is no company that is better off by spending more than they make by buying back shares and borrowing to pay dividends. Yes the stock price may be higher but the company is not better. GE is just a worst case of this waste of funds as they had unfunded liabilities that were merely ignored after being understated in order to promote earnings as being higher than they actually were, which is the reason GE’s accounting is under a criminal probe by the justice department.

IBM has utilized much the same strategy over the long run and like GE has gotten good short term runs in the stock - they have utilized 116 billion in the last decade to purchase their own stock back and in that time IBM’s total sales have fallen by 15 % and the stock price, despite several 50%+ runs which would have made any executives quite wealthy through stock appreciation the stock price is below where it was 10 years ago after 116 billion in sharebuybacks.

Exxon Mobil has purchased 180 billion of stock back over the last 10 years and likewise has had several share runs of 50%+ making their executives wealthy but it also is below where it was in stock price of 10 years ago. Even while Exxon Mobil’s sales have slid by 20% during this last decade long term debt has increased 400% from 7 billion to 28 billion, greatly increasing the leverage in a company that is one bad oil spill away from a huge liability.

Finally Apple computer has repurchased 150 billion in stock in the last 4 years, yes the stock has increased about 100% in value much of their increase in income during that period is due to a reduction in income tax to below 13% of net income from 21% of net income, paying slightly more in their tax rate than a McDonald’s worker who makes $10 a hour does in FICA and State income taxes.

They plan to spend in excess of 100% of income for the next few years in buying back stock, which should make present executives very happy, until of course AAPL no longer has that kind of money available. AAPL at least has no unfunded liabilities they are ignoring, nor are they likely to have a large liability pop up, I merely state the purchase of stock by Apple accomplishes nothing for the company. And as an investment AAPL is certainly not as good of an investment as it would have been 4 years ago when it still had not decided what to do with it’s accumulated cash that was stuck in tax havens.

 

[Breedlove]

IN GE's case especially selling BHGE after they ruined BHGE Selling BHGE for 23.00 after buying BHGE shares a year ago for 41.00 each .
It is like you say I worked for a GE company and all they did was line the pockets of the big guys and pound their chests ( We Are GE ) I say break them up and sell them all off . Feel sorry for the people who had years with GE and no " buts" about it these people that have ran GE are short of criminals.

 

[RobLJ]

I'm glad I sold this dog (GE) about a year ago at 22, due to no clear sense of what the then CEO's strategy was going to be. Since I bought it in '08 at about the same price (a little lower), I primarily gained the dividend over a decade.

If it drops to 6 over the next month, I might buy a little back, just for grins.
I also lucked out in selling GM before the recent decline, due to tariffs (primarily increased steel and aluminum costs).

 

[Freedom56]

After that disaster of a third quarter, I dumped my GE 2022 notes. The cash flow situation was disturbing and so was the investigation again into their accounting. Free cash flow went 180 degrees negative between Q3 and previous quarters. Something smelled fishy. I have held those since 2010 and they paid a 5.6% coupon. I sensed an elevated chance of default before their maturity in early 2022 and dumped them just above par plus my accrued interest. At the beginning of the year these notes were trading 10 points above par. This week GE's bond sell-off accelerated. Those same notes are trading at 91 cents on the dollar with a yield of almost 9%. This is for a note with just over 3 years to maturity. The market is pricing something much more than a downgrade to Junk status. The asset sales appear to be a sign of desperation. It's more than likely that the equity holders will be wiped out completely if they file for bankruptcy. Holders of unsecured notes would only receive pennies on the dollar. I would not venture into GE stock or its bonds until there is more visibility. Something is not right.

 

[aja8888]

I would not venture into GE stock or its bonds until there is more visibility. Something is not right.

You mean like "Slime in the ice machine?" (Houstonites would get this)

 

[MooreBonds]

Buy high, sell low. Not exactly a long term success strategy.

But they can make it up not only volume....but scale, too!