Skip to main content

Market Overview

GE Analyst: Short Report Would Have Some Merit 2 Years Ago

GE Analyst: Short Report Would Have Some Merit 2 Years Ago

Shares of General Electric Company (NYSE: GE) plummeted Thursday after a short seller report penned by Harry Markopolos emerged that argued the company is engaged in fraud.

If the report surfaced two years ago it would have more merit, William Blair analyst Nicholas Heymann said on CNBC's "Squawk Box" Friday.

Years Late To The Market

If a short seller report emerged in 2016 or 2017, it would have been "a lot more substantive," since the company did take a $15-billion writedown charge in early 2018, Heymann said on "Squawk Box."

But a short seller report today comes at a time when GE is working with regulatory bodies, including the Securities and Exchange Commission and Department of Justice, to "go through all of their accounting," he said. 

Of particular interest to regulators is the timing of revenue recognition and the adequacy of disclosure, the analyst said. 

The Math

Even if Markopolos' findings are accurate — especially the thesis that the company requires $18.5 billion in reserves to pay claims in its insurance business — it is far from fatal to the company. The sum of unrestricted cash and revolving lines of credits minus commercial paper outstanding is north of $60 billion, Heymann said. 

Other sources of capital GE can access include the guaranteed $21.4 billion from the sale of its biopharma business and a hypothetical sale of the health care business for north of $40 billion, he said.

The company has near-term access to north of $100-billion cash to address an "$18.5-billion alleged requirement," the analyst said. 

"Like I said, if this was announced in 2016 or 2017, it would be a very different, real, substantive, kind of pulling back the covers," he said. "I don't think today — I don't think that's where we are at."

GE shares were up 8.56% at $8.68 at the time of publication Friday. 

Related Links:

GE CEO Larry Culp Strikes Back, Buys 252K More Shares

What The Option Market Is Saying About General Electric Following Fraud Allegations

Latest Ratings for GE

Mar 2021Morgan StanleyMaintainsOverweight
Jan 2021Morgan StanleyMaintainsOverweight
Dec 2020DZ BankUpgradesSellHold

View More Analyst Ratings for GE
View the Latest Analyst Ratings


Related Articles (GE)

View Comments and Join the Discussion!

Posted-In: CNBC Harry Markopolos Nicholas Heymann William BlairAnalyst Color Short Sellers Analyst Ratings Media Best of Benzinga

Latest Ratings

NIUDaiwa CapitalInitiates Coverage On41.5
QMCONorthland Capital MarketsInitiates Coverage On12.0
IBKRJefferiesInitiates Coverage On89.0
MRETFTD SecuritiesDowngrades18.5
SWKSGoldman SachsDowngrades135.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at