General Electric stock split: Will GE conglomerate break-up unlock hidden value?
In November 2021, General Electric (GE) announced that it will be splitting its business into three separate companies. It says that these standalone ventures will be “better positioned to deliver long-term growth and create value for customers, investors, and employees.”
The plan is to create two separate companies for GE’s Aviation and Healthcare businesses and a third corporation that will own and operate the conglomerate’s renewable energy, power, and digital business units.
The upcoming GE split means that the stockholders of record by the time the spin-offs are completed will be entitled to receive shares in all these new businesses.
As of 6 January 2022, GE's stock has lost close to 10% of its value over the past year. The company’s strategy and upcoming divisions are likely targeted at turning the company’s fortunes around.
General Electric Live Stock Price Chart
In this article, we will share further details about the upcoming General Electric splits so our readers can be informed about what could happen if they own shares of the conglomerate, or plan to buy some.
What is a stock split?
Stock splits are financial transactions that consist of multiplying the outstanding shares of a company by a certain number. Every shareholder of the business is entitled to receive a certain number of shares for every stock they own at the moment the split is performed.
For example, if a company decides to perform a 4-for-1 stock split, it means that a stockholder of record will receive 3 additional shares for every stock they own. As a result, instead of owning one share, they will own four shares in the company.
A stock split does not affect the financial performance of a firm nor does it improve its valuation in any way. Companies typically use these operations to increase the liquidity of their equity instruments, potentially making them more attractive to retail investors by lowering their price, or to comply with the listing requirements of a given exchange.
It is important to note that the upcoming GE split will result in the creation of three separate companies, which is different from a stock split. It is unclear whether future General Electric stock splits – divisions of the new companies’ stock – will occur.
The upcoming division of the company will effectively mean that the current stock – GE – will no longer trade on the stock market, and will gradually be replaced by three new, different firms which will likely trade under new stock tickers.
What is your sentiment on GE?
What is General Electric (GE)?
General Electric is one of America’s most well-known companies. It was founded in 1892 after it acquired the assets of the Edison General Electric Company, a business founded by Thomas Alva Edison.
Since then, the company has grown to become a conglomerate that commercialises different types of products, from electric components to jet turbines. Tthe business can be divided into four different productive units:
Aerospace: produces materials and components for the aviation industry and provides aftermarket services.
Healthcare: manufactures and commercialises advanced medical devices.
Renewable Energy: builds infrastructure capable of generating energy by using renewable sources.
Power: provides equipment and solutions to the energy industry with a strong focus on oil & gas and power generation.
During the first semester of the 2022 fiscal year, General Electric produced total revenues of $35.7bn. GE Aerospace accounted for the bulk of that total, with revenues of $11.7bn, followed by GE Healthcare ($8.9 billion), GE Power ($7.7bn) and Renewable Energy at ($6bn).
The CEO of General Electric is H. Lawrence Culp, Jr. By the end of 2021, GE was, reportedly, employing 168,000 people in its affiliated companies. This includes 40,000 employees in the Aerospace unit, 48,000 people employed by the Healthcare unit, another 38,000 working for the Renewable Energy business and 32,000 employed in the Power unit. The company is headquartered in Boston, Massachusetts.
General Electric stock is listed on the New York Stock Exchange (NYSE) under the ticker symbol ‘GE’. The company’s shares are also listed in many other exchanges around the world, including Mexico, Argentina, Colombia, Switzerland, Italy and France.
General Electric (GE) 5Y Stock Price Chart
Past performance is not a reliable indicator of future results. – Source: TradingView, NYSE
In the past 5 years, General Electric stock produced a 46.92% loss for investors compared to the 43.61% and 79.07% gains produced by the S&P 500 Index (US500) and the tech-heavy Nasdaq 100 Index (US100), respectively, during that same period.
When was the last General Electric stock split?
According to data from StockSplitHistory, a General Electric stock split has occurred seven times in the past.
The following is a list of past stock splits performed by the company:
June 1971 – 2-for-1 split
June 1983 – 2-for-1 split
May 1987 – 2-for-1 split
May 1994 – 2-for-1 split
May 1997 – 2-for-1 split
May 2000 – 3-for-1 split
August 2021 – 1-for-8 split (this has been the only General Electric reverse stock split)
When will the next GE stock split occur?
The timetable for the upcoming General Electric split starts with the spin-off of the company’s healthcare unit into a publicly traded entity that has already been named GE HealthCare.
Shares in this new entity will be listed in the Nasdaq Global Select Market under the ticker symbol GEHC according to GE’s Form 10 registration statement with the US Securities and Exchange Commission (SEC).
The spin-off was completed during the first week of 2023 after General Electric’s Board of Directors approves the transaction and other regulatory requirements are fulfilled.
General Electric distributed 80.1% of GEHC stock among the owners of GE stock in correspondence with the number of shares they own. Moreover, the former parent company of the healthcare business has retained the remaining 19.9% stake in the business.
GEHC shares rose as much as 8.4% in their Nasdaq debut on 4 January, and its chief executive said the company was looking to do small acquisitions to boost its cardiology and oncology operations in the long term, according to a Reuters report.
The next business to be spun-off will be GE Vernova. This company will reunite the firm’s renewable energy, power, digital, and energy financial services businesses into one entity. The resulting GE stock split is expected to occur in early 2024.
After this last spin-off, General Electric will be renamed ‘GE Aerospace’, an aviation-focused business that will own and operate an installed base of 39,400 commercial and 26,200 military aircraft.
“By creating three separate companies, each will benefit from greater focus, tailored capital allocation, and strategic flexibility to drive long-term growth and value,” GE’s management team commented in an investor update published on 18 July 2022.
Further details about how many shares of the newly-created companies each GE shareholder will get as a result of this General Electric stock split will be shared by the Board of Directors and leadership team of the original company after the official GE split date for each entity is announced.
GE split analysis: Will a General Electric split boost the price of the stock?
GE stock has recorded a 10% decline since the company announced the upcoming split into three different entities.
A stock split or a spin-off does not have an immediate impact on the financial performance of a business. In this regard, the leadership team of GE has stated on multiple occasions that they believe in the benefits resulting from letting these three units operate as standalone companies as they will be more flexible and adaptive than now.
External factors including a complex macroeconomic environment marked by strong inflationary pressures and rising interest rates, geopolitical tensions in Europe amid Russia’s ongoing invasion of Ukraine, and challenging supply chain conditions have weighed the most in the performance of GE’s equity lately.
Moving forward, the evolution of these variables may have a higher influence on the valuation of these businesses rather than company-specific factors or the upcoming GE splitting.
GE to split into 3 companies: What do the analysts think?
According to data from MarketBeat, the consensus recommendation for General Electric stock is ‘moderate buy’, based on the opinion of 11 analysts. The majority of these financial services firms – 10, to be exact – have rated the stock a ‘buy’. Two analysts maintainted a "hold" rating on the stock as of
Meanwhile, the average price target for GE stock, as of 6 January 2023, stood at $93.42 a share, resulting in a 31.2% upside potential. The highest price target sat at $136 and the lowest at $73.
Back in November 2021, when the GE split was announced, analyst Joseph O’Dea from Wells Fargo told CNBC:
Meanwhile, analysts from D.A. Davidson commented the following in January last year:
Finally, analyst Joshua Aguilar from Morningstar stated the following in July 2022:
“Larry Culp is engineering a successful turnaround of GE that the market still has yet fully to appreciate. We think shares have unfairly priced in deal limbo following GE's announcement that it will spin off its healthcare business in early 2023, and its energy business in early 2024.”
The bottom line
While news of a stock split may provide valuable insight into a company’s performance, they should not be used as a substitute for your own research.
Always do your own due diligence before making an investment decision, based on a broad selection of analyst commentary, market data, and respected news sources. And never invest or trade money that you cannot afford to lose.
FAQs
Did General Electric perform a stock split?
GE will will split its business into three standalone companies. This will not result in a stock split. Instead, shareholders of GE will receive a certain number of shares in the newly created companies once the spin-off is completed.
What 3 companies will GE split into?
General Electric will be separated into three standalone businesses: GE HealthCare, GE Aviation, and GE Vernova. The spin-off of GE HealthCare is expected to be completed in the first week of 2023 while the GE Vernova spin-off is expected to occur in early 2024.
Is GE paying a dividend?
General Electric currently pays a quarterly dividend of $0.08 per share resulting in a dividend yield of 0.47% as of 19 October 2022.
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