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Shares of General Electric Co. shot higher Tuesday, the struggling industrial giant's plan of its stake in its stake in Baker Hughes gave investors reason to cheer after a bruising period.
The stock
GE, + 8.04%
10.8% on April 10, 2015, according to FactSet data. Trading volume swelted to over 151 million shares, compared with the full-day average of about 137 million shares-the most active among major U.S. exchanges.
The rally comes after the GE shares closed the $ 8 mark for the first time since the depths of the financial crisis. It had declined in 13 of the previous 14 sessions, to shed 37% during that stretch.
Baker Hughes's stock
BHGE, -0.13%
rose 1.4% Monday, after falling 18% the previous 14 sessions.
Do not miss: GE stock closed at 9-year low after JP Morgan warns worst is yet to come.
See also: GE in crisis mode as its stock suffers worst 8-day run since March 2009.
GE said Tuesday it is selling up to 101.2 million of the shares of Baker Hughes it currently owns in a secondary public offering, and about 65 million shares directly to Baker Hughes. The shares could be valued at up to $ 4.0 billion.
The stake would be left behind in the Baker Hughes at 50%, which is a 180-day lockup period. In June, GE said he planned to "fully separate" Baker Hughes.
Cowen analyst Marc Bianchi said that GE still owns over half of Baker Hughes suggests "the next transaction" by GE is a spinoff of their outright stake, rather than an outright sale.
GE and Baker Hughes also announced that he was transferring certain U.K. pension liabilities to Baker Hughes, the Baker Hughes country intercompany services fee to be reduced over time and a long-term collaboration on critical rotating equipment technology.
S & P Global Ratings said Tuesday that its two-notch downgrade of GE's credit rating last month did not include cash proceeds from a stake sale, so sees the deal in a positive light.
Also read: GE stock dives toward 9 1/2-year-old as new CEO leads to the same result for investors.
"We view this action as further evidence of the actions by GE to bolster its cash position to provide some flexibility to continue to address the issue of contingency planning," S & P Global said in a statement.
But while the GE's stock rallied, bond investors took a different view of the deal. The most-active 4.418% notes that mature in November 2035 fell about 2 points to 81.8 cents on the dollar, pushing it's yield to about 285 basis points (2.85 percentage points) above comparable Treasury yields from about 264 basis points on Monday.
Despite Tuesday's surge, GE's stock has plunged 54% over the past 12 months and Baker Hughes shares have shed 25%, while the S & P 500 index
SPX, -0.06%
has gained 5.9% and the Dow Jones Industrial Average
DJIA, -0.36%
has climbed 8.3%.
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