by Lynn Shapiro
, Writer | March 04, 2009
GE's stock fell about 16 percent Wednesday, as news that shareholders are suing GE's chief executive Jeff Immelt and other top officials added to the company's troubles.
"The law firm of Harwood Feffer LLP filed a class action lawsuit on March 3, 2009 on behalf of purchasers of the common stock of General Electric Company during the period January 23, 2009 through February 27, 2009," the plantiffs' lawyers announced.
"The complaint alleges that on January 23, 2009, the company's chairman and CEO, Jeffrey Immelt, stated unequivocally that GE would maintain its quarterly $.31 per share dividend, having sufficient cash on hand and cash flow to achieve that goal.
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"Then on February 27, 2009, GE suddenly announced it was cutting the dividend to $.10 per share. On the first trading day after the dividend reduction announcement, GE shares fell from $8.51 per share the previous trading day to close at $7.60 per share. The shares have continued to plummet, currently trading at $6.30 per share, an almost 30 percent plunge," the lawsuit says.
The complaint goes on to say that during the same period, Immelt sold over 52,000 shares of GE stock at $11.10 per share and other officers of the company sold over 380,000 shares at that same price.
"Mr. Immelt then repurchased 50,000 shares after the announcement at between $7.51 and $8.30 per share. As a result, Mr. Immelt and the other officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by issuing false and misleading statements or knowingly or recklessly failing to know of those statements, sold GE shares at inflated prices based on those statements," the plaintiff's lawyers said.
Immelt and GE Capital's chief, Michael A. Neal, said they bought stock on Monday to show their confidence in the company. Meanwhile, analysts following GE say that GE's board should vote to spin off the financial business, so GE's industrial businesses will be allowed to thrive. GE Capital is dragging the company down, so that its shares are trading at just 8.5 times estimated earnings, not a fair valuation for GE, considering its industrial units are worth far more than that.