“GE is one recession away from Chapter 11. Their balance sheet is in tatters,” Markopolos told Julia Chatterley on CNNi’s “First Move” show Friday.
“We’ll see how solvent they are at year end, and we’ll see if they make it into 2020,” he added.
The company has shot back, saying Thursday the Markopolos claims are “meritless” and disputing his allegations of a looming cash crunch. “GE continues to maintain a strong liquidity position, committed credit lines, and several executable options to monetize assets.”
The company also said it “expects to make significant progress” towards reducing its debt by the end of 2020.
As of June 30, GE had nearly $106 billion in debt on its balance sheet– including liabilities from GE Capital — and just $71 billion in cash.
Markopolos rose to fame as a whistleblower by correctly predicting that Bernard Madoff’s money management firm was a fraud years before it collapsed in 2008.
And in a separate statement sent to CNN Business Friday, CEO Larry Culp said “GE will always take any allegation of financial misconduct seriously. But this is market manipulation — pure and simple.”
“Mr. Markopolos’s report contains false statements of fact, and these claims could have been corrected if he had checked them with GE before publishing the report,” he added.
Culp is putting his money where his mouth is. He bought $2 million of GE stock on Thursday, as did several other GE insiders, as a show of confidence in the company’s future.
GE has been busy selling assets over the past few years to pay down debt and position itself as a leaner firm. Under the leadership of previous CEOs Jack Welch and Jeffrey Immelt, GE became too bloated. The company, which used to reliably generate solid earnings growth, started to miss Wall Street’s forecasts — causing its stock to plunge.
On Friday Markopolos told Chatterley that he continues to worry about GE’s insurance business, adding that the company waited until the last minute to take writedowns.
Markopolos also dismissed claims by GE that he will profit
ing from the fall in the company’s stock price because he is working with a firm that is shorting GE stock — betting that the price will go down so it can make money off of the decline.
He would not name the investment firm, saying simply that he’s a “seeker of the truth.”
“If I see accounting fraud, I go after it,” he said.
Markopolos added that he’s had “ongoing discussions” with the Securities and Exchange Commission and the Department of Justice about their investigations into GE’s accounting.
GE has said in regulatory filings and during earnings conference calls with analysts that is cooperating with both the SEC and DOJ. The SEC declined to comment about the status of its GE probe. The DOJ was not immediately available for comment.