What Happened With the GE Stock Split

What Happened With the GE Stock Split

The term GE stock split can refer to two distinct events in General Electric’s history:

1. The 2021 reverse stock split, which changed GE’s share count and price format.
2. The subsequent spin-offs, which created new publicly traded companies such as GE HealthCare (GEHC) and GE Vernova (GEV).

While these events are related, they serve different purposes and have unique effects on the stock. In this article, we’ll break down each event and explain what traders need to know about the implications for GE stock.

Quick Overview of Key Events

Event	What Happened	Key Dates And Ratios
Reverse Stock Split	Every 8 shares became 1 share, with a proportional price adjustment	Approved May 2021. Completed July 30, 2021. Split adjusted trading began Aug 2, 2021.
GE HealthCare Spin-off	GE shareholders received GEHC shares, creating a separate public company	Record date Dec 16, 2022. Distribution after market close Jan 3, 2023. GEHC began trading Jan 4, 2023.
GE Vernova Spin-off	GE shareholders received GEV shares, creating a separate public company	Record date Mar 19, 2024. Spin-off before market open Apr 2, 2024.

The 2021 GE Reverse Stock Split Explained

The 2021 GE reverse stock split involved a 1 for 8 ratio, meaning every 8 shares of GE were exchanged for 1 new share. This led to an increase in the stock price, as the number of shares was reduced. The reverse split was completed on July 30, 2021, and trading began on a split-adjusted basis on August 2, 2021.

A reverse stock split does not inherently change the overall value of a shareholder’s position. Instead, it simply alters the number of shares owned and their price. After the split, the number of outstanding shares decreased from approximately 8.8 billion to 1.1 billion.

Why GE Carried Out the Reverse Stock Split

The reverse stock split was a strategic decision aimed at aligning GE’s share count with that of other industrial companies. After years of restructuring and divestitures, GE’s share count had become unusually high compared to its peers. The company believed that this reverse stock split would help improve market perception by bringing the share count more in line with its competitors.

The main takeaway here is that the reverse stock split was not intended to change the underlying business value. Instead, it was a structural change designed to simplify the company’s share structure.

About Reverse Stock Splits

Adjustments in Charts and Historical Data

One of the most noticeable effects of a reverse stock split is on historical price charts. Most charting platforms display split-adjusted data, which resizes previous prices to account for the reduced number of shares. This ensures that price trends remain consistent and not distorted by the split.

For traders, this is important when analyzing historical support and resistance levels or running backtests. If you export data for analysis, ensure it is adjusted for corporate actions like splits to avoid discrepancies.

Impact on Fractional Shares and Cash in Lieu

A reverse stock split can create fractional shares if your holdings aren’t divisible by the split ratio. For example, if you held 85 shares before the 1 for 8 reverse stock split, you would receive 10 shares post-split, and the fractional portion of the 11th share would be compensated with cash in lieu.

Traders should check with their broker regarding specific handling of fractional shares, as the procedures may differ depending on how the shares are held (directly or through a broker).

Options Adjustments

Reverse stock splits also affect options contracts. Since standard equity options represent 100 shares per contract, a 1 for 8 reverse split alters the number of shares each contract represents.

In GE’s case, the Options Clearing Corporation (OCC) adjusted options contracts into GE1, where the deliverable became 12 GE shares per contract, with cash paid for any fractional shares. This is an important adjustment for options traders to consider, as it changes the number of shares they’re entitled to and may impact their options strategies.

The Separation Into GE HealthCare and GE Vernova

While the reverse stock split was a structural decision, the subsequent spin-offs created two new independent companies: GE HealthCare and GE Vernova. These companies now trade under the tickers GEHC and GEV, respectively.

GE HealthCare Spin-off

GE HealthCare became an independent company in 2023, with GE shareholders receiving one GE HealthCare share for every three GE shares held. This spin-off allowed GE HealthCare to operate independently, focusing on innovations in the medical technology space, particularly in areas like medical imaging and diagnostics.

GE Vernova Spin-off

GE Vernova, which focuses on sustainable energy solutions and the renewable energy sector, will become an independent company in 2024. GE shareholders will receive one GEV share for every four GE shares held, creating a separate publicly traded company focused on the growing energy sector.

For traders, it’s important to understand that these spin-offs are not the same as a stock split. While both involve changes to GE shareholders’ holdings, a spin-off creates an entirely new, independent company, while a reverse stock split only changes the number of shares and their price without affecting the overall company structure.

What This Means for Traders and Investors

Price Fluctuations After the Split and Spin-offs

Since the reverse stock split and spin-offs, the GE stock price has been driven by the performance of its remaining entity, GE Aerospace, as well as the newly separated companies. The performance of GE HealthCare and GE Vernova will also affect the stock price movements, as each company is subject to its own market dynamics.

As of 2023 and 2024, GE Aerospace has been performing well, with strong demand in defense and aerospace technology. Meanwhile, GE HealthCare has seen growth in medical imaging, and GE Vernova is capitalizing on the growing need for sustainable energy solutions.

For investors, this means that the performance of GE (now primarily focused on aerospace) may differ from GEHC and GEV. Each company will be evaluated on its own growth potential, industry trends, and market conditions.

Growth Prospects and Market Sentiment

GE has shown signs of recovery and growth, especially in the aerospace and healthcare sectors. Revenue growth has rebounded from a low of $29 billion in 2022 to $44 billion in 2023, thanks to wins in engine technology and aerospace. This positive trend has encouraged investor optimism about future growth, but the company still has room for improvement in terms of profitability and return on invested capital.

With the GE HealthCare and GE Vernova spin-offs, each company now has its own growth drivers, such as the demand for medical technology and renewable energy solutions. As a result, GE stock will likely experience more volatility as investors weigh the individual prospects of each company.

Conclusion

The term ge stock split is often used to describe both the 2021 reverse stock split and the subsequent spin-offs that created GE HealthCare and GE Vernova.

Understanding these corporate actions is essential for traders, as they affect not only the number of shares and stock price but also the performance of each newly independent company.

Traders should pay attention to split-adjusted charts, the handling of fractional shares, and any options contract adjustments when dealing with post-split GE shares. As GE transitions into three separate companies, investors will need to evaluate the future growth prospects of GE Aerospace, GE HealthCare, and GE Vernova individually.

By understanding these changes and keeping track of the market dynamics surrounding each business, traders and investors can make more informed decisions moving forward.