The world has become increasingly focused on the stock market, and when companies such as General Electric (GE) make announcements, investors must pay close attention. One such announcement lately is GE plans to split its core business in two, moving the health care and aviation businesses into one company, and the power and renewable energy segment into another. This makes GE the first Dow Jones Industrial Average to split in recent years. So the big question is: what will happen to GE stock when the company splits?
To get to the bottom of this, many investors believe it is best to look back and see how other similar companies have fared when they have split their core businesses and operations. Companies such as Tyco and eBay are good examples; when they split, both companies experienced unexpected stock surges after. Based on this, one would think that GE’s stock would also benefit from the split.
However, many analysts believe that other factors are at play here. For example, GE has gone through a series of cost-cutting measures recently, which have led to fewer employees, reduced profits and decreased investor confidence. This could weigh heavily on the stock in the short term as investors may be hesitant to get involved with a company following such financial strain. Additionally, healthcare and aviation are both highly competitive industries, so there is always the chance that GE may struggle to maintain its current market share in the long-term.
Some experts believe that there could be potential long-term benefits to GE’s stock. As the power and renewable energy segment becomes its own company, it could potentially be better managed and better focussed. Additionally, the two companies would no longer be weighed down by one another and could instead strive separately. This could also create a new sense of excitement around the two stocks and could potentially lead to higher growth rates in the future.
The most important thing for investors to remember is that any changes in a company’s stock price come with a certain level of risk. Splitting into two separate companies may or may not be beneficial for GE’s investors depending on various factors. While investors should pay close attention to any announcements from GE, they should also diversify their portfolios and limit their exposure to any one stock.
Impact of Global Markets
Another factor that investors have to consider is the impact of global markets. When GE splits, it will have to contend with different markets in both the power and renewable energy sector and the healthcare and aviation sector. This could create a lot of volatility for the stock as investors try to understand the impact the split will have on GE’s overall performance.
This is especially pertinent given that the two areas of business cover a wide range of countries and regions. Splitting will bring to light how vulnerable each business is to external forces, such as weather, wars, politics, etc. As a result, investors will need to factor this into their decisions when determining whether or not to invest in GE stock.
Yet investors should also take a look at some of the potential gains that GE could experience in both its divisions. For example, GE is already looking to make investments in a number of emerging markets such as the Middle East and Africa. This could potentially increase the company’s stock value in the long-term.
Similarly, GE could benefit from the new opportunities that will arise from the split. After splitting, the two companies will no longer need to compete or cooperate with one another, potentially leading to new revenue opportunities for both. Investors must take this into account when assessing whether or not the split will be beneficial for GE’s stock.
Ge Stock Split Readiness
GE has also been working hard to ensure it is ready should the split go ahead. This includes a number of corporate restructuring initiatives, such as spinning off five of its divisions into separate entities. This will help to make the split smoother, ensuring that each division is profitable and that both of the new companies can be successful.
GE has also been improving its corporate governance. This involves appointing a new leadership team and overhauling the board structure, which has been shown to help create more transparency and accountability. All of these moves should help reassure investors that GE is taking the necessary steps to ensure a successful split.
Investors should also remember that the process of splitting and restructuring GE’s core business will take time. GE plans to have the split complete and the two companies fully operational by the end of 2021. This means that any effects of the split may not be seen until 2022, so investors will have to weigh their decisions carefully regarding their investments in the company.
Leverage the Split
Upon completion of the split, GE will be able to leverage its new business model in a number of ways. Both the power and renewable energy segment and the healthcare and aviation segment could benefit from a stronger focus and more specialized management. Additionally, by becoming two separate entities, each can quickly capitalize on opportunities that would have been limited when lumped into one company.
GE is also looking to offer investors the chance to own a stake in both of the new companies. This could help to broaden investor portfolios, as well as potentially providing greater returns for those looking to invest. Although there are still many questions to be answered, it appears that GE is the process of positioning itself to offer the best possible investor experience regardless of which of the two new companies they chose to invest in.
Applying Pressure
The split of GE has also put pressure on some of its competitors to follow suit. Companies such as Siemens and Toshiba have both been considering splitting their respective conglomerates, while others such as IBM and Northrop Grumman have been exploring more focussed strategies in order to remain competitive. This competitive pressure could lead to further stock price surge when their splits are announced, so investors should take heed.
Overall, GE’s split presents both risks and opportunities to its investors. On the one hand, the split could create a lot of volatility for the stock and there are certain concerns about the company’s health in the short-term. On the other hand, the split could open up new opportunities for GE’s investors and the two new companies could potentially offer a better return on investment than the previous one.
Predicting Stock Price
It is near impossible to predict exactly what will happen to GE’s stock price when the company splits. Investors must carefully consider various factors such as the company’s overall financial health, the impact of global markets and changing competitive dynamics, as well as the potential benefits of the split. By carefully weighing this information, investors can decide whether they should be investing in GE stock following the split or not.
Investors should also be prepared for the unexpected. While splits can often lead to increased stock prices, investors must also be aware of any potential risks associated with them. However, if done properly, GE’s split could potentially lead to a rewarding experience for those investors who choose to stay with GE.
