General Electric Company
- Company Name
- General Electric Company
- Stock Symbol
- Class Period
- February 26, 2013 to January 24, 2018
- Motion Deadline
- April 17, 2018
- Southern District of New York
The complaint charges General Electric (“GE”) and certain of its officers with violations of the Securities Exchange Act of 1934. GE is a globally diversified technology and financial services company that offers a wide variety of products and services, including aircraft engines, power generation, water processing and household appliances. GE operates along several segments, including GE Capital, GE Power, and Oil & Gas.
The complaint alleges that during the Class Period, defendants concealed material information and/or made false and misleading statements regarding the performance of various GE business segments, the actual value of its wholly-owned subsidiary GE Capital and its long-term care (“LTC”) insurance portfolio, and the sufficiency of loss reserves for GE Capital’s known LTC liabilities, resulting in material overstatements in GE's net income, earnings and cash flow figures during the Class Period. As a result of defendants concealing or misrepresenting this material information, GE securities traded at artificially inflated prices during the Class Period, with its stock reaching a high of $32.93 per share.
Then in late July 2017, GE disclosed that the LTC portfolio at GE Capital’s legacy insurance business was experiencing “adverse claims” and that GE would need to “assess the adequacy of [its] premium returns.” In addition, GE announced it was suspending further dividends from GE Capital to address insufficient insurance reserves.
On November 13, 2017, GE cut its annual dividend in half, from $0.96 to $0.48 per share, explaining that GE had been paying a dividend above its industrial free cash flow for a number of years and would not be paying a dividend in 2018.
On January 16, 2018, GE announced that comprehensive review and reserve testing for GE Capital’s insurance portfolio would result in an “after-tax GAAP charge of $6.2 billion for the fourth quarter of 2017, and [that] GE Capital expects to make statutory reserve contributions of ~$15 billion over seven years.” Then on January 24, 2018, GE announced that the SEC was “investigating the process leading to the insurance reserve increase and the fourth-quarter charge as well as GE’s revenue recognition and controls for long-term service agreements.”
As a result of this series of disclosures, the price of GE stock fell over 50%, from $32.93 per share on July 19, 2017 to $16.18 per share on January 25, 2018.