Shares in beaten-down industrial conglomerate General Electric Company (GE) climbed 2.79% on Tuesday, May 3, after a Securities and Exchange Commission (SEC) filing revealed that Chairman and CEO Larry Culp purchased additional shares in the company.
- General Electric (GE) CEO Larry Culp has acquired an additional 65,000 shares in the company, taking his direct ownership to over 210,000 units.
- Insider stock purchases typically indicate a level of confidence in a company that outside investors may not necessarily see.
- GE appointed Culp as CEO in 2018 to turn the industrial conglomerate's fortunes around after years of declining earnings and dwindling shareholder returns.
- The company will be splitting its core businesses into three independent publicly traded companies. One will focus on healthcare, another will target energy, and the third will be devoted to aviation.
Culp accumulated another 65,000 shares in the company—worth slightly over $5 million as of Tuesday's close—taking his direct ownership to 211,210 units, according to the filing. A GE proxy statement cited by Barron's shows that Culp has 2.2 million shares in all "stock-based holdings."
Discounted Buying Opportunity?
Insider purchases typically indicate a level of confidence in a company that outside investors may not necessarily see. Those who have stock in GE are very much hoping this to be the case, given the company's shares are trading around 34% below their 52-week high of $116 set in November last year. Since the start of 2022, GE shares have declined by 17.79%, underperforming the blue-chip proxy Dow Jones Industrial Average (DJIA) by nearly 9%.
Given GE stock is down over 80% from its all-time high, Culp may have seen the discounted price as an opportunity to acquire more shares ahead of a major company restructure planned over the next several years.
Culp's Company Reset
The GE board appointed Culp in 2018 to turn the industrial conglomerate's fortunes around after years of declining earnings and dwindling shareholder returns bought about by a slowdown in U.S. industrial production, the global financial crisis, and more recently, the COVID-19 pandemic. In his first four years at the helm, Culp's main priorities have been reducing the company's debt and improving operational efficiencies across GE's divisions.
GE to Spin Off Businesses
Culp announced in November last year that GE would be splitting its core businesses into three independent publicly traded companies. One will focus on healthcare, another will target energy, and the third will be devoted to aviation—currently the conglomerate's most profitable division. GE plans to spin off its healthcare unit by early 2023, followed by its energy arm a year later.
"By creating three industry-leading, global public companies, each can benefit from greater focus, tailored capital allocation, and strategic flexibility to drive long-term growth and value for customers, investors, and employees," Culp said at the time of the announcement.
Investors will hope Culp's ambitious restructuring plans for the company restore its mantle as an American icon for innovation and industry transformation.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.