Why didn’t GE use the $45bn in buybacks to take care of the $31bn negative equity?

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After GE’s monster $22bn goodwill impairment charge, the company remains in negative equity to the tune of $31.3bn. $79.2bn in goodwill remains on the balance sheet with $31.5bn in shareholders equity and $16.4bn in non-controlling interests. To think GE spent $45bn on buy backs over 2015 & 2016. Imagine if the company had used those funds to shore up the balance sheet and go back to positive equity?

While the kitchen sinking of GE Power should be deemed a positive (although somewhat expected) it is interesting to see the reaction to the shares (-9%) which flirted with April 2009 lows. Cutting the 1 cent dividend from 12 cents in the grand scheme of things was optics.

Although the goodwill charge is a non cash item on the balance sheet, she is clearly not in a position to deal with the rest of the goodwill just yet.

The brand new CEO has done the right thing to restructure the former largest company in the world but he has drawn attention to the most gangrenous wound that needs to be cauterized.

It is still a rough ride from here for an industrial stock at the top of the megacycle to have such a dreadful balance sheet.

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