GE splits: What does that mean for you?

Welcome back to Coffee & Cash!

Today our video focus is a bit different.  We have recently been asked questions about the newly announced split going on at General Electric Company, especially by those individuals that have current GE pensions in play and are curious how this might impact them.

First, lets talk about why this is happening.

This company split has been long-time in the making. Over the decades, GE has diversified into many markets such as power, consumer appliances, banking services, cable channels, and manufacturing of heavy equipment.

This complex business structure was originally done to multiply profits and mitigate risk. But as with all plans, things don’t always bring the planned results and they have been forced to re-evaluate a return to simplicity….especially as they have experienced a radical decline in share values since the late 90’s. And since then they have been challenged with other legal and financial troubles, which have now brought them to this new endeavor to survive.

So, they have elected to split into 3 companies that will focus on energy, healthcare and aviation. GE says its health-care spin-off should be in operation in early 2023, and its energy company in 2024.  Lastly, with the be new Aviation company, with no timeline yet to be determined.

So you may ask…What will happen to my GE stocks?   

In short, a stock split increases the number of shares outstanding and lowers the individual value of each share. Let’s say you have one share of GE’s stock. If the company opts for a 2-for-1 stock split, the company would grant you an additional share, but each share would be valued at half the amount of the original. Currently, it is anticipated that GE shareholders are likely to receive shares of the new energy and healthcare companies as dividends when they spin off. What remains will become the aviation company.

As far as taxes go, GE says the change will be tax-free. Of course, as is always the case, selling any of the shares could leave you on the hook for capital gain taxes depending on the original cost of the shares you purchased.  This is the time in the video we recommend you talk with a financial advisor to review your personal situation before taking next steps.

Lastly, to those with GE pensions, because pensions are somewhat of their own entities, it is not likely you will find your pension related to these corporate changes.  As always there are strict guidelines pension plans must follow as well as insurance protections in place to sustain them when there is looming financial stress or corporate changes. 

Of course, if you have any questions, please feel free to call our office or book a time directly on our calendars with the link in the description. Thanks for joining us for another episode of Coffee & Cash! Don’t forget to subscribe and we will see you next time.