General Electric Co. shares will open Thursday on the New York Stock Exchange about 1.25% down on their Wednesday close following its agreement to pay $200 million to settle a Securities and Exchange Commission action against it.
The share price rose 3.83% in Wednesday trade to close at $11.39 each. It opened the day at $11.00.
"General Electric appears to have pulled a variety of levers to make its financial statements look a lot healthier than its businesses actually were," Bloomberg Opinion said in an article published Thursday.
"No company wants to pay a large fine to the commission but putting this issue in General Electric's past rather than its future removes a big lingering risk for a company that is slowly, but surely, starting to change," the analysis says.
"Nothing in the commission's filing should come as a surprise to observers of the company. In January 2018, General Electric disclosed a $15 billion shortfall in its long-term care insurance reserves. Later that year, it took a $22 billion write-down on the goodwill in its power division. The company's market value is down nearly $200 billion from what it was at the start of 2017. The commission's findings still make for some fairly brutal reading, though, Bloomberg said.
General Electric agreed to pay $200 million to settle the case against it filed by the commission over allegations it misled investors. General Electric agreed to submit to the commission all of its accounting and disclosure policies for the next 12 months.
The commission said it found sufficient evidence to prove General Electric misled investors between 2016 and 2017 about its insurance and power businesses. The regulator said General Electric also failed to inform shareholders and creditors of the risks involved with General Electric Capital between 2015 and 2017.
"General Electric's repeated disclosure failures across multiple businesses materially misled investors about how it was generating reported earnings and cash growth as well as latent risks in its insurance business," commission division of enforcement director Stephanie Avakian said.
Avakian said General Electric was guilty of failing to disclose material information to investors over how it had managed to generate more than $1 billion in profits from its energy business. She said General Electric pulled forward $2.5 billion in uncollected cash by selling receivables to its own subsidiary.
The settlement is the latest in a series of deals reached between the company and the commission over misinformation allegations. In 2017 and 2018, General Electric agreed to settle charges against it by paying civil fines.
General Electric Co. denied all of the commission's findings and admitted no wrongdoing during its last settlement.
As for its latest settlement, a General Electric Co. representative said settling the case was in the best interests of the company and its shareholders and creditors. The company neither admitted nor denied the commission's accusations.
