Recent Sell – GE

I decided to publish this as my weekly post as time is of the essence for any of my readers contemplating a similar decision.

Since the most recent dividend cut, I’ve been holding my GE stock – and almost pulled the trigger to buy more – for one reason: the potential value of the proposed spinoffs. The healthcare unit being a crown jewel and the rail unit being an interesting one.

Word on the street is that the healthcare IPO may not be as lucrative to GE investors as previously thought as GE may monetize a greater share (probably good for the company, though). This I was willing to overlook until the terms were actually released.

My decision to sell was reached when the revised terms of the rail unit were released. Last week it was announced that GE would monetize more of the deal – basically to shore up the balance sheet a little with cash and by shifting the tax liability to shareholders. End result is each share of GE will receive approximately .005403 shares of WAB. You read that right – owners of 100 shares will receive about a half of a share of WAB. As no fractional shares are to be issued, cash in lieu of shares is to be expected.

I’m willing to take a slight loss (as I previously averaged down). What I am unwilling to take is a possible tax liability as well. Frankly, my faith in this company no longer extends that far.

The record date has been set for February 14th with the spin and merger occurring February 25th. If so inclined, I’ll buy WAB at a later date. I am willing to buy into the healthcare unit at (or post) IPO depending on the structure.

I have to acknowledge that the days of playing the contrarian are probably over for this stock. My prior strategy – which was profitable – had been to buy companies which had purchased units that GE was offloading. Under this CEO – and for the first time in many years – this plan is no longer viable.