GE Stock at New Low After Board Nominations, Buffett Notes

General Electric will also restate its 2016 and 2017 earnings, per an SEC filing

Feb 26, 2018 at 10:02 AM
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General Electric Company (NYSE:GE) is in the spotlight today, after the company said it has nominated three new candidates to its board of directors and a Securities and Exchange Commission (SEC) filing on Friday revealed the industrial conglomerate will restate earnings. Warren Buffett also chimed in on GE in his annual letter to shareholders, and against this busy backdrop, the shares have swung 1.7% lower this morning to trade at $14.25 -- the only Dow stock in negative territory so far.

Diving deeper, General Electric's new slate of potential board candidates includes previous American Airlines CEO Thomas Horton, ex-Danaher chief Lawrence Culp, and former chair of the Financial Accounting Standards Board (FASB), Leslie Seidman. In April, shareholders will vote in 12 directors to the board -- down from 18 -- with nine current directors up for re-election.

Additionally, GE will restate 2016 and 2017 earnings due to a new accounting standard, resulting in a per-share loss of 13 cents and 16 cents to the respective reports. This follows an SEC investigation in the wake of General Electric's massive writedown in its insurance business, which Buffett said "staggered" him. However, the Oracle of Omaha also wrote in his letter, "If we liked the business and the price was right, we could write a check for cash and that would apply to GE."

It's been a dismal run on the charts for GE shares, which are down 17% year-to-date -- the worst Dow stock so far this year. What's more, the security hit a fresh six-year low of $14.04 earlier, though the $14 region has served as a floor going back to 2010.

Options traders appear to be bracing for a quick bounce, with the stock's March 18 call home to peak front-month open interest of 130,770 contracts. Data from the major options exchanges confirms significant buy-to-open activity here in recent months -- meaning speculators will profit on a move north of $18 over the next few weeks.

This could be indicative of a new batch of short sellers hedging against any unexpected upside risk, though. Short interest on GE shot 26.2% higher in the two most recent reporting periods to 142.35 million shares, the most since mid-December 2016. However, short interest accounts for a low 1.6% of the stock's available float, meaning the bearish bandwagon is far from full -- and could create additional losses for the Dow stock, should shorts continue to pile on.

 

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