Why General Electric Shares Fell Today
Shares of General Electric (NYSE: GE) fell by more than 4% in early trading today as investors continue to fret about growth prospects in the economy and, in particular, ongoing supply chain difficulties. While most stocks were weak today due to these issues, GE is particularly at risk because it's preparing to initiate a breakup of the company with a spinoff of GE Healthcare in early 2023.
I've touched on this issue previously, but when companies are spun off they're generally priced on the basis of enterprise value (market cap plus net debt) to earnings. If earnings (in this case GE Healthcare) are weak, then it will reduce the amount of debt that GE Healthcare can carry to ensure a smooth spinoff.
Unfortunately, GE Healthcare was heavily hit by supply chain disruptions in the first quarter, and it's hard to tell what the company will report for the second quarter. There will be pent-up demand for equipment installations and COVID-19 restrictions will likely have eased at healthcare facilities. However, supply chain constraints continue to impact the economy at large.
Source Fool.com
