GE shares slide after secondary stock offering
General Electric Co (GE.N: Quote, Profile, Research, Stock Buzz) shares fell as much as 10 percent on Thursday, touching a new 5-1/2-year low, as its sale of $15 billion in new stock to investors including Warren Buffett failed to soothe Wall Street worries.
GE shares have tumbled about 40 percent this year as the global credit crunch has taken a heavy toll on its hefty finance arm and the company warned that 2008 profit could drop 12 percent.
The U.S. conglomerate sold $3 billion in preferred stock at $22.25 per share to Buffett’s Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research, Stock Buzz)(BRKb.N: Quote, Profile, Research, Stock Buzz) on Wednesday, and another 548 million common shares at the same price to other investors on Thursday.
GE said the new capital will help improve its liquidity and provide the option to make acquisitions at a time of market turmoil.
The U.S. Senate approved a $700 billion financial bailout package on Wednesday, and the U.S no checking account payday advance. House of Representatives is scheduled to vote on the plan on Friday.
The rescue plan is intended to reinvigorate credit markets and frozen interbank lending, stabilize battered risky assets, including stocks, and ease corporate lending.
Because of the breadth and depth of its operations, which stretch around the world and include jet engines to electricity-generating turbines to lending to the NBC television network, GE is regarded as an economic bellwether.
“The fact that GE needs to go out and sell shares at $22.25 is not particularly good news,” said Michael Church, financial analyst and portfolio manager at Church Capital Management, a Pennsylvania-based company that oversees $2 billion in investments and holds GE shares.