GE had to slash the price of its $12 billion emergency stock offering to get the deal done... and now the selling pressure is so intense that the underwriters have given up supporting the deal price and the stock has already smashed through it (a few minutes ago, it was approaching $22). GE's trailing price-earnings ratio, moreover, is now only 10X.
What does this mean?
- The market understands that GE only did that stock deal because it absolutely had to.
- The market is not persuaded that all the skeletons in the GE Capital closet have been removed.
- Even Warren Buffett is now underwater (sort of -- he has that awesome 10% coupon).
- With the market collapsing, GE is being thrown out with everything else.
It's time to work through how much GE's non-financial businesses are worth to see what value the market is assigning to the battered GE Capital. We'll try to get on that, but if anyone has a good report handy, we'd be grateful if you could send it along (hblodget@alleyinsider.com).
Meanwhile, the credit markets just continue to get worse... suggesting that the market doesn't believe the bailout will do much to restore confidence.
