Can Flannery Buy More Faith in GE?
After cutting its dividend on Monday, General Electric Co. (NYSE: GE) has run the gauntlet this week. The company even saw its market cap fall below the likes of Toyota and Mastercard. Now it seems that recently appointed CEO, John Flannery, is taking an increased stake in the company in hopes that it will turn around. But is it too late?
Last year we saw a similar tactic from the chief executive of JPMorgan, Jamie Dimon, who bought 500,000 shares of his megabank. Effectively, this helped engender some faith in the markets and definitely turned things around. People have even called it the Dimon bottom. However, it’s a little different with GE and Flannery.
In a recent SEC form, Flannery reportedly bought 60,000 shares for $18.27 per share, a total investment of $1.096 million. Even with GE’s market cap falling, this stake is still just a drop in the bucket. Although, it seems that this is the most he could afford as his annual salary is $2 million, with his annual bonus starting at $3 million. Former CEO, Jeff Immelt, had a $3.8 million salary with a bonus starting at $4.3 million.
However, the question remains whether Flannery staking half his salary on GE can really restore some faith in the stock. It seems to be a step in the right direction as shares were up about 1% early on Friday after this stake was disclosed.
What might hurt the most is that Flannery won’t be getting the most out of his stake, especially after slashing the dividend earlier this week.
24/7 Wall St. pointed out earlier that while cutting the dividend seemed like the catalyst for this drop in the stock, it was really just the final straw. The reduction in the dividend, from $0.24 per quarter to $0.12, is the first since 2009, the depths of the financial crisis. Not only that, but GE might have some planned divestures to make the company more profitable as well.
Currently, GE has a market cap of roughly $159 billion, which barely ranks within the 50 largest public companies in the world.
Shares of GE were last seen up almost 1% at $18.42, with a consensus analyst price target of $23.53 and a 52-week range of $17.46 to $32.38.