Struggling GE gets unplugged from Dow
General Electric will be dropped from the Dow Jones industrial average next week, ending the industrial conglomerate’s more than 100-year run in the 30-company blue chip index.
S&P Dow Jones Indices said yesterday that GE will be removed from index before the open of trading next Tuesday. Its slot will go to drugstore chain Walgreens Boots Alliance.
“General Electric was an original member of the DJIA in 1896 and a member continuously since 1907,” says David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. “Since then the U.S. economy has changed: Consumer, finance, health care and technology companies are more prominent today and the relative importance of industrial companies is less.”
“Today’s change to the DJIA will make the index a better measure of the economy and the stock market,” Blitzer said.
GE has been struggling in recent years, shrinking dramatically since it became entangled in the financial crisis a decade ago.
The company is under investigation related to a $15 billion hit it took to cover miscalculations at an insurance unit.
The company is relocating to Boston from Fairfield, Conn., after a promise of up to $25 million in tax incentives tied to the number of employees it hires. The company is building its new headquarters in the Seaport District.
GE’s plunging stock price factored into the decision, according to the announcement from S&P Dow Jones Indices.
“The DJIA is a priceweighted index, and the range of prices among its 30 constitutes matter. The low price of GE shares means the company has a weight in the index of less than one-half of one percentage point.”
GE closed yesterday at $12.95 and dropped to $12.77 in after-hours trading. The stock’s 52-week high is 28.72.
Walgreens was up on the news. After closing at $64.61, the stock climbed to $66.30 in after-hours trading.