A few months ago, GE’s CEO Jeff Immelt did a world-wide-webcast to investors explaining why GE’s stock was undervalued. A few weeks after that, GE blew its quarter. Two weeks ago, GE sent out an investor relations blastmail explaining why GE Capital wasn’t like all those boneheaded Wall Street firms. A few days later, GE announced a big writedown at GE Capital, stopped buying back its stock, and cut its guidance for the quarter and year.
And now, Jeff & Co. have announced a shockingly expensive capital infusion:
- $3 billion of preferred stock with a 10% coupon
- Warrants at $22.50 on another $3 billion of common stock
- A forthcoming $12 billion common equity financing.
Add all that up, and you have about 7% equity dilution…at GE’s lowest stock price in 10 years. As Justin Fisher notes below, this comes after GE repurchased $27 billion worth of stock at an average price of $36 a share in the past three years.
Better than going bankrupt? Hell, yes. Better than Lehman Brothers and AIG? You’d better believe it. Smart? Let’s hope so.
But expensive? Painfully.