Trystan Casey
General Electric (GE) completed its breakup into three companies on Tuesday, 2nd April 2024. The 132-year-old conglomerate, once the most valuable US corporation, split into GE Aerospace, GE Vernova, and a separate healthcare business. GE's aerospace business is expected to be worth over $100 billion, and its shares rose by about 2% in mid-afternoon trading. The breakup is the culmination of CEO Larry Culp's efforts to turn around the company, which was almost bankrupted by the 2008 financial crisis and bad investments.
| Characteristics | Values |
|---|---|
| Date of split | 2nd April 2024 |
| Number of companies split into | 3 |
| Names of new companies | GE Vernova, GE Aerospace |
| Stock split type | Reverse stock split |
| Ratio | 1-for-8 |
| Previous name | General Electric (GE) |
| New name | GE Aerospace |
| Share price at mid-afternoon on 2nd April 2024 | Up about 2% |
| Date of announcement | 2021 |
| Ticker symbol | GEV (GEV.N) |
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What You'll Learn
- GE completed its three-way split in April 2024
- GE Aerospace shares rose by 2% at mid-afternoon on the day of the split
- The breakup ends GE's 132-year history as a conglomerate
- GE Vernova's renewable energy segment is loss-making
- The split will result in corresponding stock splits for existing shareholders
GE completed its three-way split in April 2024
The three new companies are GE Aerospace, GE Healthcare, and GE Vernova. GE Aerospace will retain the GE symbol and will include the company's aerospace business, which makes engines for Boeing and Airbus jets. Analysts estimate its market value at over $100 billion, and it is expected to benefit from increased demand for aftermarket services due to delays in jet deliveries by Boeing and Airbus. GE Healthcare has already been spun off as of January 2023, with GE selling an 80.1% stake in the business. GE Vernova, which produces 30% of the world's electricity, made its debut under the ticker symbol GEV, and its shares rose by about 5% after the split.
The breakup is the culmination of CEO Larry Culp's efforts to turn around the company, which was nearly bankrupted by bad investments and the 2008 financial crisis. Culp's focus on paying off debt, streamlining operations, and improving cash flows ushered in a recovery, with GE slashing over $100 billion in debt and quadrupling its free cash flow since 2018. The split is expected to remove the conglomerate discount and the drag from loss-making segments on the share price.
The spinoff of each individual company from GE, as well as the renaming of GE Aerospace, will result in corresponding stock splits for existing shareholders. A forward stock split occurs when a company's stock price is too high, while a reverse stock split happens when the price is too low.
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GE Aerospace shares rose by 2% at mid-afternoon on the day of the split
On April 2, 2024, General Electric (GE) completed its split into three separate companies, bringing an end to the 132-year-old conglomerate. The company's aerospace and energy businesses began trading on the New York Stock Exchange (NYSE) as separate entities, with GE Aerospace retaining the "GE" symbol.
The share price rise also reflects the successful turnaround of GE under CEO Larry Culp, who took over in 2018 when the company was struggling with weak profits and significant debt. Culp focused on paying off debt by selling assets and improving cash flows through streamlining operations and reducing overhead costs. As a result, GE slashed over $100 billion in debt and quadrupled its free cash flow.
Additionally, the positive performance of GE Aerospace shares can be attributed to the company's previous simplification efforts. Since 2018, GE has spun off stakes in various businesses, including an 80.1% stake in Healthcare and stakes in Baker Hughes and AerCap. These moves have unlocked value and improved the company's performance, leading to increased investor confidence in the newly formed GE Aerospace.
Overall, the 2% rise in GE Aerospace shares at mid-afternoon on the day of the split reflects the market's positive outlook for the company's aerospace business and the successful turnaround and simplification efforts led by CEO Larry Culp.
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The breakup ends GE's 132-year history as a conglomerate
On April 2, 2024, General Electric (GE) completed its breakup into three companies, bringing an end to the 132-year-old conglomerate. GE was formed in 1892 when famed inventor Thomas Alva Edison merged Edison General Electric Co. with a rival company. Over the years, GE has touched various aspects of life, from bringing electricity to selling appliances and financing mortgages.
The breakup resulted in three independent, publicly traded companies, each focusing on a specific industry: aviation, healthcare, and energy. The aviation and energy businesses, GE Aerospace and GE Vernova, respectively, began trading separately on the New York Stock Exchange. GE Aerospace, valued at over $100 billion, retained the "GE" symbol, while GE Vernova debuted under the ticker symbol "GEV."
The decision to split was made in 2021, aiming to simplify the company and improve its financial performance. Since then, GE has been working to pay off debt, streamline operations, and improve cash flow. The conglomerate had struggled with bad investments and the impact of the 2008 financial crisis, which nearly bankrupted its most profitable business, GE Capital. The pandemic also affected its jet engine business as global air travel was halted.
The breakup of GE ends its long history as a conglomerate and marks a significant change for a company that was once the most valuable U.S. corporation and a global symbol of American business power. While the GE name is going away, Wall Street remains optimistic about the prospects of the new companies, especially GE Aerospace, which is expected to benefit from its strong position in the aviation industry.
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GE Vernova's renewable energy segment is loss-making
General Electric (GE) recently completed a three-way split, marking the end of the 132-year-old conglomerate that was once the most valuable US corporation. GE's aerospace and energy businesses began trading separately on the New York Stock Exchange, with GE Aerospace retaining the GE symbol. The energy unit, GE Vernova, debuted under the ticker symbol GEV.
GE Vernova, which became an independent company following the three-way split, provides services and equipment to the energy sector. It operates through three main businesses: power, wind, and electrification. While the power and electrification segments are profitable, the wind division has faced challenges.
In its first results as a standalone company, GE Vernova reported a net loss. The company's wind segment saw a decline in orders due to lower demand for onshore equipment, particularly from North American customers. This weakness in the wind segment has contributed to a wider-than-expected first-quarter loss for GE Vernova in 2024. The wind division recorded a 6% year-over-year revenue decline, dragging down the overall performance of the company.
However, there are positive signs for GE Vernova's outlook. Analysts believe the company could benefit from increased demand for electricity and renewable energy methods as countries work towards reducing greenhouse gas emissions. GE Vernova affirmed its 2024 guidance, projecting total revenue of $34-35 billion, and expects the wind segment to approach profitability by the end of the year. The company expects cash generation to improve meaningfully every quarter, and its restructuring efforts have significantly reduced costs.
Prior to the three-way split, GE had also completed a one-for-eight reverse stock split in 2021, reducing the number of outstanding shares of common stock. This was part of a strategy to simplify the company and improve its financial position.
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The split will result in corresponding stock splits for existing shareholders
General Electric (GE) has completed its breakup into three companies, bringing an end to the 132-year-old conglomerate. The split resulted in a three-way stock split for existing shareholders. The industrial giant's aerospace and energy businesses began trading separately on the New York Stock Exchange more than a year after GE spun off its healthcare business.
GE's stock split history dates back over 50 years. The most recent GE stock split occurred in January 2023 and involved the spinoff of GE Healthcare. Holders of GE common stock received one share of GE Healthcare common stock for every three shares of GE common stock. GE retains a nearly 20% stake in GE Healthcare.
An additional stock split occurred when GE Vernova was spun off from the rest of GE. GE's remaining divisions were then renamed GE Aerospace. GE Vernova will merge GE's various energy businesses, including gas, steam, and wind power generation, power grid technology, nuclear energy, and energy consulting. The businesses that constitute GE Vernova posted combined revenue of $29.2 billion in 2022.
In August 2023, GE Vernova announced the acquisition of Greenbird Integration Technology AS, a data integration platform company focused on utilities. This acquisition is expected to reduce time and expenses for data integration projects.
Prior to the three-way stock split, GE also completed a one-for-eight reverse stock split in August 2021. This reduced the number of outstanding shares of GE common stock from approximately 8.8 billion to approximately 1.1 billion. The reverse stock split was approved by GE shareholders at the annual meeting on May 4, 2021, and was implemented to better align the number of outstanding shares with companies of GE's size and scope.
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Frequently asked questions
General Electric completed its split into three companies on Tuesday, 2 April 2024.
The three companies that General Electric split into were GE Aerospace, GE Vernova, and GE Healthcare.
General Electric decided to split into three publicly traded companies to simplify its business and improve its price performance.
Analysts estimate the market value of GE Aerospace to be over $100 billion. GE Vernova intends to enter into a $3 billion committed trade finance facility.
General Electric was formed in 1892 when Thomas Alva Edison merged Edison General Electric Co. with a rival. It has since touched all parts of life, from electricity to appliances and financing mortgages.
