How GE Raised Its Share price By 700%
General Electric just raised its stock price by more than $90 per share.
stock (ticker: GE) will open for trading Monday at about $104 a share, after closing at $12.95 Friday. The company completed its 1-for-8 reverse stock split Friday night.
When the split was announced in March, CEO Larry Culp explained: Barron’s he wanted GE’s stock price and number of shares to be more comparable to those of peer companies.
(ETN), for example, both have three-digit stock prices.
Shares of Honeywell closed Friday at $233.79. Eaton’s stock closed at $158.05.
The reverse split brings GE stock part of the way to those peers. As of Monday, however, GE’s results will have to do the heavy lifting.
Splits and reverse splits are usually big deals for investors in the short term.
Regular splits, which result in lower share prices, should signal management confidence going forward and make it easier for retail investors to buy shares. Reverse splits, on the other hand, usually put investors in trouble. They are a sign that things are going wrong.
For General Electric, the typical reverse stock logic probably doesn’t apply. For starters, GE is a huge company with a market cap of over $113 billion. Reverse splits are usually the domain of smaller companies. And GE’s struggle has been well documented for years. GE’s reverse stock split could actually be seen as another sign that the company is breaking with its more troubled past.
Culp was brought on board in late 2018 to recover GE’s ailing businesses. He is the first CEO brought in from outside GE to lead the company. Progress has been made. Culp has sold assets, reduced debt and lowered costs. As a result, GE’s free cash flow from its industrial operations is rising again after years of declines.
The reverse split is news, but in the long run splits and reverse splits don’t amount to much. They are more about keeping stock prices in known ranges. The average share price in the
is around $200. The average stock price for industrial companies in the S&P 500 is about $180.
The median stock price — the price at which half of the stock is above and half below a value — for the S&P is $120. The median is a measure that helps normalize stocks with abnormally high prices such as:
(AMZN), for $3,327.59, and
(NVR), for $5,222.60.
Write to Al Root at [email protected]