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GE To Be Kicked Out Of Dow, Deutsche Predicts

•, by Tyler Durden

General Electric has been an original component of the Dow Jones Industrial Average (DJIA) index - which was invented by Charles Dow in 1896 - for over 110 years. It may not be there for long, however: in a note from DB's John Inch, the analyst writes that he "believes the chances that GE could be removed from the Dow are increasing as GE continues to face substantial challenges including earnings and cash pressure, tough global power generation markets, aggressive downsizing, shrinking its portfolio, management shake-up and SEC investigations."

How would the expulsion take place? Deutsche explains:

The Dow is managed by committee (a part of S&P Global) that meets twice a year in secret to review (and potentially make changes) to the component companies. The index is intended to represent the "best" large companies in the US. The index is not market cap weighted but weighted by absolute share price. Consequently, apart from GE's other challenges, as the company's absolute share price has continued to drop (and as the share prices of the other companies have been increasing), GE increasingly falls into the category of outlier and consequently a likely candidate for removal, in our opinion.

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