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To: Knighty Tin who wrote (279423)	3/10/2004 12:09:34 AM
From: ild	Respond to of 436258

Fleck on GE: GE Rolls Out a Retro Pushcart Last night, something occurred in equity land for the first time since 1961: GE issued 119 million shares, for approximately $3.8 billion. The offering was a "spot secondary," and it wasn't widely anticipated, if anticipated by anyone at all. This is a bit of a milestone in and of itself. I think most people have the notion that GE regards equity as precious, with no desire or need to issue any. With interest rates near zero and GE reputed to be the intergalactic financial wizard that folks think it is, one would probably expect the company to use debt rather than equity. So, its decision to issue equity is intriguing. Last year, GE bought back $726 million of stock, likely at lower prices than where it's selling the shares. So, from that comparison, it's a buy-high-sell-low. However, when you look at 2002, GE bought back about $985 million worth (at least half of which was probably for higher prices). But the real faux pas, if you will, comes from 2001, when GE bought back that $2.435 billion worth, almost all of which had to be at higher prices -- and substantially higher prices, at that. Sugarplums Immelt in His Mouth As for the likely reason behind this milestone move, despite potential financial-structure concerns, a knowledgeable friend who'd like to remain nameless (and provided me with the data) said, "Immelt's pay package was changed last fall from EPS targets to operating-cash flow-targets, not OCF per share, i.e., not operating cash flow per share but just operating cash flow!!!" The net result of this, as my friend notes, is that "you can keep issuing stock and buying companies to achieve the target, even if you keep diluting shareholders. . . . " Whatever GE's motive, this offering may represent a seismic shift. It will be interesting to see if other companies start rethinking their stock buybacks, which have often occurred at ridiculous prices in order to help sop up all the shares issued via options (which, of course, "aren't expenses"). Given that lots of folks mimic GE and its rationalization, I will be most curious to see if other companies follow suit.