SCHENECTADY — Shareholders of General Electric Co. who weren't paying attention may have been surprised Monday when their shares were suddenly trading above $100 — after ending last week around $13.
No, GE shareholders didn't suddenly become eight times richer over the weekend.
It's just a little trick that public companies use these days amid the decadelong surge on Wall Street that has pushed the stock prices of the fastest-growing technology companies into the stratosphere.
Facebook is trading around $350 a share these days. Amazon trades for more than $3,300 a share.
So at a time when a bigger share price is better — at least in the eyes of investors — GE didn't look so great, even as it has made great strides to turn its financial fortunes around under turnaround specialist Larry Culp Jr.
And the company's $12 stock price didn't help.
That's why Culp recently pushed to do what's known as a reverse stock split, in which GE will essentially combines eight of its shares into one — thereby instantly raising the share price eight-fold. Shareholders approved the move in May.
"The split would decrease the number of shares outstanding to a number more typical of companies with comparable market capitalization," GE said when it announced the plan in March.
Essentially that means that GE's stock price was lower than its peers because it had so many more shares outstanding. For instance, industrial companies that are somewhat similar to GE such as Honeywell and Boeing each have less than 600 million shares outstanding. But those companies are in the Dow Jones Industrial Average stock index, from which GE was dropped several years ago because its stock value had deteriorated so much.
But in reality, shareholders don't make any money. The company has just reduced the number of shares of common stock that are outstanding from 8.8 billion to 1.1 billion.
GE's first headquarters was established in Schenectady in the late 1800s and the company employs several thousand people in the Capital Region, including at its global research lab in Niskayuna. There are thousands of GE retirees in the region, making GE's stock price of important interest.
After the reverse stock split became effective at the start of trading on Monday, GE shares started trading at $104, rising to $107 later.
But as of Tuesday afternoon, GE shares were trading at $102, which is effectively lower than Friday's close.
So GE shareholders have actually lost value since the reverse stock split was completed.
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August 04, 2021 at 12:48AM
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GE's stock rises to over $100 a share — but shareholders no richer - Times Union
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