For the period ending December 31, short sellers increased their position in General E;ectric (NYSE: GE) by 47% to 155 million shares. It may seem that making such a bet against a company with one of the largest market caps and most diversified businesses in the world is a very, very big gamble.
What do the short sellers see? The first argument they have for their move is that GE's financial services units are in worse shape than investors know. Credit markets have been so bad that earnings from these parts of GE will collapse.
Short sellers could also argue that the entertainment unit NBCU will have its advertising revenue hurt by the recession. But the revenue from NBCU is not large enough to hurt GE badly.
GE's industrial unit may be glowing slowly, but that has been true for some time.
The real gamble is that GE's most successful unit, its infrastructure operation, will hit a wall in the U.S. and overseas. GE's management has built the unit up as foreign countries have needed everything-infrastructure from turbines to dams. GE's infrastructure operation sells high ticket items and is relying on emerging markets to keep its revenue and earnings growing at what has so far been a remarkable pace.
But the recession may suck the growth out of emerging markets, and GE's most important business may be in for a shock.
Short seller betting against GE may not be taking much of a bet at all.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
1-13-2009 @ 10:42AM
Sheldon L said...
So GE stock has 1.6% of its shares (float) sold short. A far cry from C which has 3 times as many. Perhaps this will get uglier by mid-year...when currently debated Federal infrastucture spending here and abroad takes hold and the shorts run for the hills...or perhaps Buffett decides to take a bigger stake in the company when the shorts drive it down...and drives them out? ...or perhaps I am too optimistic about the second half of the year being more stable.
1-13-2009 @ 1:13PM
david Caever said...
the short sellers lead by the lady on fast moey destroied lehman and destroied thousands of lives. you people and your kind are traitors to americaand hopeful you will get yours its coming soon.
1-13-2009 @ 11:21AM
andy reckles said...
and there are how many shares outstanding??? and this is what percentage of that??? almost 10 billion shares in the float here, 1.1% of the float or so...not a big bet in the scheme of things...
1-13-2009 @ 3:45PM
bob said...
learn how to spell.......it should be " led" by.......... and it is " destroyed " and it is " money "
1-13-2009 @ 1:32PM
Bob Baldwin said...
The problem with GE is not the short sellers. It is the management and the board. They seem to have decided that capitalism is passe, and are behaving like a quasi-government entity, with accompanying "efficiencies" that we know and love about government. Maybe they have made enough points with Obama that he'll throw them some bones, but I wouldn't count on it. Any shareholder who votes to re-elect current board members is foolish. With this bunch running things, it might become a "penny stock".