GE faces the end of an era
On Tuesday, the S&P Dow announced that Walgreens Boots Alliance will replace General Electric in the Dow Jones Industrial Average, marking the first time in 110 years that the company will not be in the Dow.
GE has encountered a whirlwind of hardships in recent years, including a mountain of debt, the replacement of its CEO, and the cut of thousands of jobs. In the past year, General Electric (GE) has seen its stock value plummet over 54%. After the Dow released the news, shares fell an additional 2% on Tuesday.
In order to pay off its debt, which has tripled in the past five years and values at roughly $77 billion, the company has resorted to the sale of many business conglomerates. This includes the sale of their century-old railroad business to Wabtech for $11 billion and the potential sale of their lightbulb business, which has struggled in recent years.
The Dow made the decision based largely on the difference between GE’s stock comparison to the most valuable company in the Dow, Boeing. While the Dow likes to keep a ten-to-one ratio between the top and bottom company, the two firms had a 24-1 (!!!) difference.
Walgreens Boots Alliance will replace GE on June 26. The company has a stock value of $67.81 on Wednesday, which makes it have just a 5-1 ratio with Boeing. After news surfaced on Tuesday, Walgreens Boots Alliance’s shares rose roughly 3%.
GE’s exit represents a long-anticipated end of an era. The once manufacturing giant had years of poor deals, and it is now facing the repercussions.
Featured image via Flickr/U.S. Department of State