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General Electric Dropped from Dow Index



After 110 years of being a member of the Dow Jones Industrial Average, General Electric (GE) will not be in the blue-chip index anymore. As of now, GE is the last initial member of the originally 12-stock index that was formed in 1896. The conglomerate company founded by Thomas Edison also has had the longest continuous presence on the Dow, beginning in 1907. GE being dropped from the Dow is the first biggest shift in the index since 2015 when Apple replaced AT&T.


The decision is announced on Tuesday (19/6) and will be effective starting from June 26. After that, the company with the longest presence in the index will be Exxon Mobil, the descendant of John D. Rockefeller’s Standard Oil Company. The iconic maker of light bulbs has stumbled badly in recent years and is now dealing with serious cash crisis. GE has replaced its CEO, laid off thousands of jobs, sold off its long-held businesses, and cut its stock dividend in half.


Over the last year, GE’s shares have plunged 55 percent, compared with a 15 percent gain for the Dow. GE, which dipped another 2 percent and closed Tuesday (19/6) at USD 12.95, has the lowest share price among the other 29 index members. It is suggested that GE’s stock price also contributed to the decision of the company’s removal from the Dow. The 30-stock index is price-weighted, which means stocks with higher price have a greater influence on its direction.


"The low price of GE shares means the company has a weight in the index of less than one-half of one percentage point,” said David Blitzer, the chairman of S&P’s index committee. GE’s position will be replaced by Walgreens Boots Alliance, a pharmacy store chain, since its share price is higher. With the inclusion of Walgreens, Blitzer said that the index “will be more representative of the consumer and health care sectors of the US economy.”


Sources :

CNNMoney

The New York Times


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