A prominent financial analyst working with a short seller accused General Electric of accounting fraud. GE's CEO called the allegation “market manipulation — pure and simple.”
General Electric Co. shares had their biggest drop in more than a decade Thursday after a prominent financial analyst working with a short seller accused the company of an “accounting fraud.” GE Chief Executive H. Lawrence Culp Jr. called the allegation “market manipulation — pure and simple.”
The allegations complicate Culp’s efforts to gain investors’ trust after GE’s years of strategic missteps and stock declines. Since taking the helm in October, he has sought to reduce risk in the finance operations, fix the power-equipment unit and stanch the flow of bad news that erased more than $200 billion from GE’s market value in the two-year period ending Dec. 31.The stock dived 11.3% to $8.01 a share, its biggest drop since April 2008.
GE’s response to Markopolos is marred by a “culture that historically hid losses and deceived investors,” said Scott Davis, an analyst at Melius Research. A prominent short seller, John Hempton of Bronte Capital, dismissed Markopolos’ analysis as “silly.” Hempton said “GE is a deeply problematic company” butTo calculate the $18.5-billion figure, Markopolos compared GE’s reserves for its long-term care insurance portfolio with those of Prudential Financial Inc.The long-term care insurance business has been difficult for virtually every company in the market.
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