is GE a buy or sell?

Discussion in 'Stocks' started by universaller, Sep 28, 2009.

  1. BUY:
    - government's support
    - too big to fail
    - will be better when the econ turns around

    - by looking at its balance sheets, it looks horrible.
    (over $500B in debt)
    - huge bet on $16 Put today worth $2.2M
    - holding a huge portfolio on commercial real estate
    (banks are putting higher reserve on 4Q for loss)

  2. The cons are a plus if the dollar implodes though. I think one reason GE is going up is due to the reality that the dollar is gonna implode.

    Puts can also indicate people are going long the stock and want to buy some insurance.

    You missed the huge 60,000 call trade for the DEC 20 strike contract a few days ago.
  3. One of the primary reasons to get short a company with a sorry looking balance sheet and poor transparency (and GE has both) is because the upside is huge. If and when the curtain is pulled and it turns out that in the light of day their financial condition is much worse than assumed their commercial paper should become impossible to roll over, large customers that count on them for multi-year commitments (jet engines etc.) should hedge their bets and look for another supplier.

    A bad balance sheet that becomes recognized as a horrendous balance sheet is a recipe for bankruptcy and heaven for a short seller.

    The problem with shorting GE is that the Fed/Treasury will not let their commercial paper or any other debt instrument default. The knowledge that they will survive helps the common. You can make money on the short side but the longs have very powerful allies.

  4. The government letting GE go under and Bailing out GS/BAC would be pretty big.

    GE is probably the last US company with an R&D arm close to the size of the former Bell Labs. Allowing GE to implode would be pretty catastrophic to the US and a major embarrassment.

    So it makes sense that big brother is keeping an eye on GE.

    And the CEO sits next to the prez on the economic team etc..

    And fox is always talking about the Evils of GE which in my book is a bullish.
  5. GE Rumor that Comcast is buying NBC for 35B

    I wonder if thats why there was a huge 60K block of calls traded with a strike price of 20 in one day.
  6. I would be quite surprised if NBC fetched that high a price. It may well be a valuable property but 35 Billion seems over the top.

  7. Twitter is worth 1 billion so it might be right.
  8. You are correct a one billion dollar cap on Twitter is pretty amazing and may turn out to signify that people will still "bid it up". But there is a difference. It cost someone one hundred million to place a one billion dollar value on twitter.

    In the NBC case you describe, the buyer will actually lay out 35 Billion. Very different types of players. And the number of players that can bid for NBC is quite limited. The size limits and the FCC rules prohibiting foreigners from controlling broadcast media limits it further.

    Crazy prices have been paid for all sorts of properties -- particularly in media deals. It just does not strike me that this is a time when bidders are likely to be expansive but hey, crazier things have happened.

    The time to sell was 2007 but they did not perceive they would need the money.

  9. NBCU bought the weather channel for $3.5 billion so theres no telling how much their other cable network holdings are worth.

    If the weather channel has that kind of valuation USA network should be worth at least $7 billion. Add in syfi, telemundo, history channel, etc. it's not very far fetch to ask for $35 billion.
  10. The ask was 5B the bid was 3.5B. They hit they bid six weeks before Lehman went down. And, I'll bet they are glad the did.

    GE may well ask 35B for NBC. It remains to be seen what the bid turns out to be.

    New York Times
    Media & Advertising

    ... athough the parties did not disclose the price, the buyers, NBC and the private equity firms Bain Capital and the Blackstone Group, will pay just under $3.5 billion, people briefed on the matter said.

    That is less than the $5 billion that the Weather Channel’s parent, Landmark Communications, sought when it put the basic cable channel and related properties like up for sale in January.

    In a sign of the weaker debt markets that have clamped down on large private equity deals, more than half of the price will be paid in equity, to be divided roughly equally among the three buyers, these people said...

    #10     Oct 1, 2009