Categories Earnings, LATEST, Other Industries

After fraud allegation spurs selloff, General Electric (GE) stock rebounds as CEO pitches in

Shares of General Electric (NYSE: GE) on Thursday suffered their biggest intra-day loss in recent times and closed the session down more than 10%. The mass selloff, which followed revelations by forensic accountant Harry Markopolos that GE engaged in accounting fraud, came at a time when the engineering juggernaut is struggling with multiple challenges.

In its response to Markopolos’ claims – that the financial manipulation is bigger than “Enron and WorldCom combined” –the company in a statement said the allegations are “meritless”. Questioning the accuser’s intentions, the company said he is being compensated by hedge funds with vested interests.

Soon after the clarification, the stock switched to recovery mode, trading sharply higher during Friday’s early session. A big boost came after chief executive officer Larry Culp purchased shares worth $2 million.

Image for representation purpose only (Courtesy: VanveenJF)

Markopolos, known for his sensational investigations and exposures in the financial market, also offered to substantiate his claims with sufficient evidence. In an interview, the whistleblower reportedly claimed to be in possession of crucial information against GE, which he wanted to withhold due to technical reasons. Unfazed by the charges, meanwhile, the GE management asserted it would “stand behind its financial reporting.”

Also read: Will Urban Outfitters emerge from the slump in Q2?

The company dismissed the allegations saying GE executives never contacted or interacted with Markopolos, who has little knowledge about the company’s functioning. The investigator in his detailed report went to the extent of saying that the only option left for GE is to file for bankruptcy.

The once-thriving conglomerate sees no merit in the charges due to Markopolos’ links with hedge funds, which according to the company often trigger short-selling in its stock for undue monetary gains. GE is already facing a detailed regulatory investigation into its financial reporting. Markopolos is credited for exposing major financial frauds, including the Ponzi scheme involving Bernie Madoff.

Related: General Electric Q2 2019 Earnings Call Transcript

One thing is certain – the latest developments do not bode well for the crisis-stricken Wall Street giant which is currently engaged in an extensive restructuring to get back on track, involving divestitures and layoffs. Last month, the company reported a loss of $61 million for the second quarter, mainly due to one-time accounting charges related to the power generation segment.

Before regaining momentum at Friday’s open, GE shares had fallen to $7.75, the lowest so far this year. They have lost 28% since last year.

Follow our Google News edition to get the latest stock market, earnings and financial news at your fingertips

Most Popular

AVGO Earnings: Broadcom Q2 2024 revenue and profit beat estimates

Semiconductor company Broadcom, Inc. (NASDAQ: AVGO) on Wednesday reported higher second-quarter revenues and adjusted earnings. The results also topped analysts' expectations. Earnings, excluding non-recurring items, came in at $10.96 per

Key takeaways from Oracle’s (ORCL) Q4 2024 earnings report

Oracle Corporation’s (NYSE: ORCL) stock rallied this week after the company announced large cloud infrastructure deals with tech giants Google, OpenAI, and Microsoft. The demand for Oracle's generative AI infrastructure

ZDGE Earnings: Zedge reports higher revenues and adj. profit for Q3 2024

Content distribution platform Zedge, Inc. (NYSE American: ZDGE) has reported higher net income for the third quarter of 2024, on an adjusted basis. The bottom line benefitted from a double-digit

Add Comment
Loading...
Cancel
Viewing Highlight
Loading...
Highlight
Close
Top