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November 30, 2018 at 08:26 PM
General Electric Co. shares sank after two analysts sounded more alarm bells around the company’s liquidity, and a report said former GE employees were being questioned by federal investigators about its troubled insurance business.
Once among the most respected American businesses, GE can now barely go one full week without a negative headline. In just the past one month, news about an expanded probe of the company’s accounting, credit rating downgrades, potential tax problems, and escalating liquidity concerns have led to a steep 27% erosion in the stock price, overshadowing more positive announcements from GE, including its accelerated exit from Baker Hughes and the restructuring of the struggling power business.
GE’s finance arm, especially, has garnered a lot of attention. The insurance business came under the spotlight earlier this year when GE said it would take a $6.2 billion charge related to an old portfolio of long-term care insurance, and has since then thrown up many more red flags. J.P. Morgan analyst Stephen Tusa warned earlier this year that the finance unit, GE Capital, may still have underappreciated risk.
(Related: 5 Debt-Laden Companies That Are Getting )Extra Investor Attention
On Friday, Deutsche Bank analyst Nicole DeBlase slashed her price target on the stock by more than a third amid continuing questions on the beleaguered multinational’s liquidity outlook. J.P. Morgan’s Tusa, a long-time bear on the company, said commentary from GE’s partner Safran SA supported his view that profit and cash flow growth at the aviation segment would be below consensus expectations.
The other blow came as the Wall Street Journal reported that several former GE employees have said the company’s insurance business failed to internally acknowledge worsening results over the years. The employees also said that they were interviewed by government lawyers.
GE spokeswoman Jennifer Erickson declined to comment on the specifics of the insurance business investigation, saying in an emailed statement that the company is “exploring every option to manage and mitigate risk” from its legacy insurance liabilities.
