THE PROBLEM WITH GE
In the last four years Net tangible assets have declined from $15 Billion to Negative $47 billion
A drop of $64 Billion in NTA.
Mainly due to all their the dividends and share buybacks.
(i.e. massive stock pumping operation)
All funded by borrowings.
Which finally trashed the share price and balance sheet.
After the shareholders suddenly realized that borrowing to fund stock purchases and dividends destroys the actual reality price (ARP) of the stock in the long term (even as it does wonders for the market reality price of the stock in the short term).
Because GE simply doesnt generate any free cash flow from its operations (I think negative 2-3 Billion....not large but adds up over time).
(unlike Apple which is a FCF king..........for now.....it appears to be starting to go down the GE path......I hope it stops in time).
As GE is still FCF negative it has no funds to pay down debt.
So it cant do a "REVERSE COYOTE" and pay down debt and add NTA and ARP value to the stock.
(Note GE has had three full coyote cycles in the last 25 years!!!!!!!!!)
So I dont think the stock goes up anytime soon unless:
Further real cost cutting, capital raising, major asset sales or significant demand increase for products occurs.
And as Mr Markopolous suggested any blow out in long term care costs, or a recession inducing drop in demand for its products, could sink the stock severely.
If I were GE I would do a capital raising here.
20-30 Billion should do the trick!!!!!!!!!!