General Electric Welcomes A New Investor

General Electric now welcomes an friendly new activist investor.

An activist investor is a relatively common term that talks about a person who buys many stakes in a company and then asks for a top ranked position in the organization’s current managerial structure. However, this is not a case for Nelson Peltz who has invested almost $2.5 billion in General Electric Company. The company got the investment through his Trian Fund through which he has netted almost 1% of the firm. This has made him one of the 10 largest stakeholders in the world. Over the past couple of years, Mr. Peltz has been part and parcel of the boardroom where he has always contributed positively to churn out big changes however now he is only offering minor and subtle suggestions. The investor came up with an 88-page PDF file that deals with debts, mergers, and acquisitions, buybacks that are not parallel to General Electric’s strategy. The Trian Fund at this point believes that General Electric’s stocks are extremely undervalued where they have a potential to accelerate to $40 or $45 by FY17. The Trian Fund has so far not made a bigger investment than this. This news regarding the investment has been received extremely positively where the stocks are up by almost 4% since the call was made. However, the only issue si that the investment might build up pressure on Jeff Immelt who is the chief executive officer of General Electric. What he really needs to do at this point of time is focused on a turnaround that has not happened over the past couple of years. The investment was made in portions merely because Peltz has given an approval about Immelt’s over the top move. He was enthralled when the CEO dismantled the organization’s financing sector, which was considered to be a cash cow for General Electric resulting in an immense burden on it when the financial crisis occurred. The only reason why Peltz did not invest earlier was that GE Capital was a liability for the company’s business. “In short, prior to GE’s ‘pivot,’ its great businesses were overwhelmed by the bad ones and the underlying defensive growth of GE’s core industrial businesses was obfuscated”, as discussed in a presentation given by Trian analyst. Several claims were made in the presentation among which, “There is an opportunity to return 40% of the market cap to shareholders by the end of 2018.” General Electric now has an enthusiast on board who would drive a change.