General Electric (GE) remains one of the most maligned publicly-traded companies. Last year Bernie Madoff whistleblower Harry Markopolos looked askance at GE’s balance sheet. Less talked about was Markopolos’s claim that GE had negative working capital:
GE’s 2018 year-ending working capital was minus $14.3B with BHGE and minus $20.3B without! Knowing this was critical information for investors, lenders, vendors, retirees, and regulators it was a willful omission on their part to not provide customary working capital reporting and disclosures in their 10-K. Do a word search on “working capital” and you will see GE spreads out its discussion of working capital over numerous pages of their 10-K and only discusses changes in working capital, but never gives you a true picture of how dire their financial position is.
Given GE’s sizeable cash position, GE bulls likely dismissed any risks from negative working capital. Secondly, over time GE had the potential to close any such capital hole. Lastly, if negative working capital did not impact GE’s credit rating then did it really matter? I think it matters a lot. General Electric is making Harry Markopolos look like a genius. Read more: