Still, there is a bit more to the story. GE is a complicated company and investors should understand the mechanics of the deal so they can react appropriately.
The back story. GE (ticker: GE) owns a controlling stake in Baker Hughes (BHGE). GE’s handling of its stake in the energy services company was one of the issues raised by forensic accountant Harry Markopolos in an Aug. 15 report criticizing the firm’s accounting practices. GE has rebutted Markopolos’s allegations.
Markopolos points out that GE consolidates Baker Hughes onto its balance sheet, an accounting treatment that doesn’t reflect market fluctuations in Baker Hughes’ stock price. Baker Hughes stock, like shares of other energy-services companies, has fallen over the past year, dropping about 26%. At the end of the second quarter, GE’s Baker stake was worth about $7.4 billion less than when GE acquired it.