It’s not a misprint, your General Electric Co. stock is now trading above $100.
That’s because the one-for-eight reverse stock split the industrial conglomerate company proposed in March just took effect. The reverse split multiplied the price of the stock investors own by 8, but also reduced the number of shares they owned, by dividing the number by 8.
The stock GE,
With all past prices now adjusted for the split, the stock’s record closing price on Aug. 28, 2000 ha been raised to $461.40, according to FactSet data.
The split took effect less than a week after GE reported second-quarter results, in which the company reported adjusted profit and revenue that beat expectations, and a surprise swing to positive free cash flow.
Reverse splits are often used by companies to lift the price of their shares, because it has fallen below, or is close to falling below, thresholds required by exchanges for listing, or that might lead some mutual-fund investors to shun their stock. Read more about reverse stock splits.
Reverse stock splits don’t change anything about the companies financial condition, except to effectively increase the earnings per share as the number of shares outstanding is reduced.
BofA Securities analyst Andrew Obin took the reverse split into account, when he raised his stock price target to $128 from $120, while he reiterated his buy and his 2021 adjusted EPS estimate at a split-adjusted $1.98 a share, in a research note to clients on Monday.
Obin said GE’s second-quarter results showed that even as the aviation business remained “choppy,” the company was making “clear progress” in its turnaround.
When GE first announced plans for the reverse split in March, in light of the company’s “significant transformation over the past several years,” the company’s intent wasn’t to raise the share price.
Don’t miss: GE’s stock sinks after proposing reverse stock split, confirming $30 billion AerCap deal.
“The reverse stock split would decrease the number of shares outstanding to a number more typical of companies with comparable market capitalization,” GE had said in a statement.
Last week, GE disclosed in a 10Q filing with the Securities and Exchange Commission that it had 8.78 billion shares outstanding as of June 30. The reverse split effectively reduces that number to about 1.11 billion shares.
GE’s market capitalization at Friday’s closing prices, just before the reverse split took effect, was about $113.7 billion, according to FactSet data.
In comparison, fellow S&P 500 index SPX,
GE’s stock has lost 3.3% over the past three months but has soared 109.1% over the past 12 months. In comparison, the S&P 500 has gained 5.2% the past three months and advanced 34.4% the past year.
