- A potential breakup of General Electric (GE -0.7%) likely undervalues its businesses by 25% or more than previously estimated, according to analysts at Melius Research.
- Previous sum-of-the-parts evaluations of GE's individual businesses cast doubt on whether a fire sale of GE's assets would even fetch today's price at ~$13.28/share, but Melius says spinoffs from U.S. industrial companies return twice the value of the broader stock market, which would imply a more optimistic forecast for GE.
- Such spinoffs have "historically created outsized value," Melius says, removing the bureaucratic culture that comes with a large conglomerate., thus "even with lackluster" spinoffs, employees are reinvigorated and able to achieve greater efficiency than were ever probable under the conglomerate.
- Spinoffs also are helped by "the scrutiny of a new shareholder base," according to Melius.
- Now read: General Electric: Lessons In KISS Investing
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