💡 How Is GE Escaping The Debt Spiral?
BlackRock's China foray, Microsoft's new hardware.
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💡 General Electric: Escaping The Debt Spiral?
After being trapped under a massive debt pile, General Electric (GE) is on a debt reduction spree. Following a slew of asset sales, the company announced an increase in the outlay for bond buyback. It aims to reduce overall debt to less than $45B by 2023. (Tweet This)
To say that GE had a tough past few years is to dramatically understate what the company has gone through. GE has the dubious distinction of losing over $100B in market capitalization over the last five years - more than Ford (F), Delta (DAL), and United Airline Holdings (UAL) combined.
GE couldn’t have timed its business moves worse. Its largest-ever industrial acquisition - Alstom's power business for $9.5B - suffered a collapse of gas turbine demand shortly after the deal was consummated. This setback was the proverbial canary in the coal mine.
Two years later in 2017, GE merged its oil & gas services business with that of Baker Hughes for a 63% stake, costing $7.4B in cash. A crash in oil prices soon thereafter meant another deal-gone-sour.
Things went so far south that there were no sacred cows to spare. GE cut its much-revered dividend in half - only the second time since the Great Depression. The company was left with an inflated debt pile and a balance sheet that would take years to clean up.
Making GE Stronger Again
Saddled with over $100B in debt, slashing it became priority #1. GE embarked on an asset selling spree to free up cash. It sold part of its stake in Baker Hughes for a loss and hopes to divest the rest over the next three years.
GE also sold its Biopharma unit to Danaher in 2020 for $20B. Earlier this year, the company sold its GECAS aircraft-leasing business to AerCap(AER) for $31B of which $24B is in cash. The company also increased the quantum of bond purchase from $4.9B to $7.6B. The offers will expire on June 21.
At the end of Q1 2021, GE's debt stood at $74B, a significant reduction from its peak. It aims to cut it by another $30B in two years. After a few mea culpas, GE finally seems to have a steady pair of hands steering the company in the form of its CEO Larry Culp.
GE ended the day at $13.63, down 0.7%.
Company Snapshot 📈
GE $13.63 -0.10 (0.73%)
Analyst Ratings (22 Analysts) BUY 55% HOLD 45% SELL 0%
New Avenues: BlackRock gets license to start China mutual fund business (BLK -0.40%)
Investigation: Eli Lilly memo says firm did not make false statements to FDA (LLY +3.29%)
At Your Fingertips: Microsoft is developing new hardware to bring its 'Netflix for games' service to TVs (MSFT +1.44%)
Later Today 🕒
Nkarta Inc. Earnings (NKTX)
Salesforce Annual General Meeting (CRM)
Brookfield Asset Management Annual General Meeting (BAM)
7:30 PM IST: Consumer Sentiment Index (Preliminary)
Fun Fact of The Day 🌞
Samsung accounts for 20% of Korea's GDP
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