General Electric Co. has set the date for the final split of the company — just as the stock had its biggest monthly gain in more than a year.

Splitting the Business

GE said late Thursday that its board of directors has approved the long-planned spin-off of its power and renewable-energy businesses, which will leave the company with just its aerospace business.

What Stockholders Need to Know

Those holding GE's stock who plan to hold it through the split don't need to take any action, and it won't cost them anything. But they will end up owning pieces of two companies instead of one.

Positive Market Response

The stock rallied 1.3% in midday trading Friday, putting it on track for its highest close since July 20, 2017. This comes after an impressive 18.5% jump in February, marking the biggest monthly gain since January 2023, and a record yearly gain of 95.2% in 2023.

In comparison, the S&P 500 gained 5.2% in February and advanced 24.2% in 2023.

What's Next?

On April 2, the 150-year old company, which was co-founded by Thomas Edison, will stop being GE and become GE Aerospace. The company will still have its stock traded on the New York Stock Exchange under the ticker symbol GE, focusing on engines, components, and systems for commercial and military aircraft.

The remaining part of the company will be spun off as a fully independent GE Vernova, which will include the current company's power, wind, and electrification businesses. GE Vernova's stock will be traded on the NYSE under the ticker symbol GEV.

These strategic moves come on the heels of the spin-off of GE's healthcare business as GE HealthCare Technologies Inc. in December 2022.

GE Shareholders Set to Receive GE Vernova Shares

GE shareholders do not need to take any action to receive shares of GE Vernova common stock to which they are entitled as a GE shareholder,” the company said in a statement. “Additionally, shareholders do not need to pay any consideration, or surrender or exchange shares of GE common stock, to participate in the separation.

Those who own GE’s stock as of March 19 will receive one share of GE Vernova’s common stock for every four shares of GE they own. That distribution is expected to occur before the market opens on April 2, at 9:30 a.m. Eastern time.

RBC Analyst Shows Confidence in GE's Potential

RBC Capital analyst Ken Herbert reiterated his outperform rating on GE’s stock and raised his stock-price target to $170 from $148.

“We can appreciate some recent stock strength can be attributed to the pending Vernova spin (~20% of the value based on the distribution),” Herbert wrote in a note to clients. “However, considering the low leverage, strong free cash flow profile, potential for margin upside, and capital allocation options, we expect GE Aero to trade at a premium to aerospace peers.”

GE Vernova's Stock Trading Details

GE Vernova’s stock is expected to begin trading on a when-issued basis on or around March 27, under the symbol GEV WI. That stock will start regular-way trading on April 2 as GEV.

Investor Days Set to Bring Positive Impact

GE Aerospace will host an investor day on March 6, and GE Vernova will host its investor day on March 7, both in New York.

“We expect the investor days to be positive catalysts for the stock,” RBC’s Herbert wrote.

Post a comment