GE (GE): A $100 Billion Share Buy-Back

Industrials

Published: June 16, 2008 1:22 pm

GE (GE) shares reached a five plus year low today, at $28.38 as a JP Morgan analysts called for the company to sell off more units.

While GE has auctioned off some modest parts of its portfolio of companies, the core businesses are still relatively intact and the company’s board shows no interest in changing that.

GE already has a 4% or better yield, so adding to that may not draw in many new shareholders.

What GE could do is buy-back a third of its shares, about $100 billion worth. It has about 60% of that cash on its balance sheet. With $16 billion in operating income, it would not have not have much trouble borrowing the rest.

The GE board has run out of alternatives if it wants to defend its current state of affairs. If its view of the correct course for the future is to keep the company as it is, then it has the chance to demonstrate that buy eating its own cooking.

The shares are cheap now. The GE board would tell Wall St. that. It can also prove it.

Douglas A. McIntyre

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