General Electric Company (NYSE:GE) shocking losses of recent times have led to the company seriously thinking of a breakup which might be initiated by spring this year. The company’s shares dipped and lost around 4% after the company made an announcement that its insurance business would be taking charge of a $6.2 billion for the fourth quarter. The insurance business of the company is a part of the slimmed-down GE Capital.
The breakup decision can be one of the most shocking developments in the company. Also, the losing stocks have already put the board of directors into distress. Reports indicate that the legendary American industrial giant is seriously thinking of splitting up the business and the trade analysts are connecting it to the recent performance of the stock of GE.
The diversified blue-chip conglomerate’s insurance loss of $6.2 billion plus the longtime efforts of GE Capital to shed assets and risks and also the recent comments by the company’s new CEO all point out to only one thing and that is a split may be under consideration. And in the present situation, it may be necessary and imminent.
According to John Flannery, CEO of the company, they are looking aggressively at the best structure/structures for GE’s portfolio so that the potential of their businesses is maximized. He said that the much-discussed strategic breakup may lead to separately traded assets in any one of the units of the company. And it could happen only if GE spun off certain divisions that can operate as independent, publicly traded companies on their own.
As for the shareholders of GE are concerned, they are likely to receive stock in these new trading companies in the proportion equivalent to their share in GE.
No New Business Since A Long Time
The Boston-based company has not done any new business since 2006 in the long-term-care market. But it is still struggling with the finances because the company is saddled with obligations on contracts that were drawn several years ago. So the old contracts are still hurting the core structure of GE.