Wednesday 19 September 2018

GE shares slump as Deutsche Bank report raises cash call questions

The company is facing a “cash squeeze” and growing debt pressures, particularly after disclosing a substantial charge related to an old insurance business, Deutsche Bank analyst John Inch said. Photo: AP
The company is facing a “cash squeeze” and growing debt pressures, particularly after disclosing a substantial charge related to an old insurance business, Deutsche Bank analyst John Inch said. Photo: AP

Richard Clough and Esha Dey

Shares in General Electric (GE) plummeted on Friday as a report from Deutsche Bank questioned whether the manufacturing behemoth's latest problems will force it to raise capital by selling shares or further cutting its dividend.

The company is facing a "cash squeeze" and growing debt pressures, particularly after disclosing a substantial charge related to an old insurance business, Deutsche Bank analyst John Inch said.

"It might be in GE's best interest to raise equity capital sooner while its stock is still elevated", given the possibility of further stock declines, he said. GE pushed back against the notion, saying it has no plans to raise new capital.

GE will report earnings next week.

A larger-than-expected, $6.2bn charge and comments by chief executive John Flannery about the possible need to break the company apart reignited investors' fears last week after the year began with a modest rally. GE was the biggest loser by far in the Dow Jones Industrial Average last year as it struggled with weak demand for many of its industrial products, from gas turbines, to locomotives, to oilfield equipment.

Bloomberg

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