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GE Shares Drop 10% After Slashing Dividend and Revealing a DOJ Investigation

Nov. 2, 2018
Culp is moving to accelerate a turnaround at the company.

General Electric’s investors knocked the company’s share price below $10 this week after the company announced its quarterly results, a cut in its dividend and news of an investigation by the U.S. Department of Justice in the first earnings report by the company’s new chairman and CEO, Larry Culp, Jr.

The DOJ is joining an investigation underway by the U.S. Securities and Exchange Commission (SEC) regarding a non-cash goodwill impairment charge of $22 billion in its GE Power business, which has seen a decline in demand for GE gas turbines. Analysts have pointed out that the SEC can file civil charges but the DOJ can file criminal charges, a sign of the seriousness of the situation for GE.

Culp is moving to accelerate a turnaround at the company. GE said in its earnings release that it plans to take “immediate actions to strengthen its balance sheet and position its businesses for success.” GE Power will be restructured into two units – one for its Gas product and services groups and the other for the rest of the business’s assets, including its Steam, Grid Solutions, Nuclear and Power Conversion units.

GE Power’s revenues in the third quarter fell 33% from the same quarter in 2017 and it reported a quarterly loss of $631 million. The company said the quarter was impacted by continued market and execution challenges in the Power business.

GE reduced its dividend for the quarter ended Sept. 30, 2018, from $0.12 to a nominal $0.01 per share, which the company said will allow it to retain $3.9 billion in cash per year.

Investors bid-down the value of the company’s shares to levels last seen shortly after the recession in 2009. GE shares had already fallen 36% since the beginning of the year.

GE Lighting, meanwhile, posted a 2% decline in revenues from the same quarter in 2017, showing $26 million in profit on $385 million in sales.

Overall, GE reported revenues of just under $29.6 billion on a GAAP basis for the third quarter, a 4% decline from Q3 2017.