Mike Blake/Reuters
- General Electric is splitting its remaining businesses into three publicly traded companies.
- An authoritative voice on the company said the GE stock bump wasn't a surprise, but eventually the "dust settles."
- Retail traders were also largely bearish, saying the company is not a good investment.
A definitive analyst on General Electric is skeptical of the company's plans to split into three companies – and some retail traders on Reddit feel the same.
Since the century-old company announced it would break up into aviation, energy, and healthcare companies, GE stock has risen about 3% total in two days of trading. JPMorgan analyst Stephen Tusa, known for his GE commentary, said that positive reaction wasn't a surprise.
"GE stock has reacted positively to almost every strategic announcement, partly due to a tightly controlled narrative," Tusa wrote in a Nov. 9 note. "As the dust settles and details emerge, the asset value to the GE shareholder has almost every time come out materially worse."
Taking into account $32 billion in net debt and another $2 billion in breakup costs, he predicted the shares altogether would be worth less than $70 apiece. As individual companies, he said aviation would be worth $43 per share, health care $23, and power $8.
"Bottom line, prior attempts at portfolio 'value creation' have fallen victim to weak underlying details versus the historically positive narrative under the GE umbrella," Tusa wrote. "Most spins tread water between announcement and consummation, but a flat stock is the best case to us."
On Reddit investing threads, like Wall Street Bets, retail traders were also more bearish about the breakup than positive. Following the announcement, discussion of the company on Reddit surged, and comments on selling GE stock outnumbered buy mentions by 8-to-5, according to data from HypeEquity.
Many retail traders noted the company's debt load and what they said was "mismanagement."
"Ultimately, no, GE is not a good investment," wrote one Redditor. "Unless something drastic or crazy changes, they're dinosaurs, and they are living off of fumes." Another said the company had "sketchy financials," and another said if it's split into three, it "flushes down the toilet easier."
The company was once an icon of American manufacturing. After hitting its peak in 2000 and tumbling during the 2008 recession, the once behemoth company has since offloaded several of its businesses, including NBC and GE Appliances, among others.