Activist investor Nelson Peltz's fund is calling on GE to cut more costs, sell more of its banking business and explore more buybacks. Fred Katayama reports.
Activist investor Nelson Peltz thinks General Electric's stock is significantly undervalued. He thinks the shares could hit $45; they now trade at $25. So his Trian Fund Management has taken a $2.5 billion stake in GE equaling 1 percent of the industrial conglomerate. His comments are powerful now that Trian has become a top ten shareholder. Peltz's company is calling on GE to cut more costs, consider selling more of its banking business, GE Capital, and explore more share buybacks. CEO Jeff Immelt replied in a statement that GE appreciates their perspectives, adding that it is on track to selling $100 billion of assets in GE Capital. William Blair analyst Nick Heymann said, "Mr. Peltz and GE's senior management appear to be fully on the same page regarding their desires and intentions ... Trian has noted it is not advocating for GE to be broken up but rather more optimally operated." While Trian has not demanded a seat on the board, the move adds pressure on Immelt to get GE's stock price higher. Shares are still down 37 percent since he took over for Jack Welch just days before the 9-11 terrorist attacks. News of Peltz's stake propelled GE higher in early trading.