Thank you. General Electric Capital, a division of General Electric, uses long-t

Question

Thank you.

General Electric Capital, a division of General Electric, uses long-term debt extensively. In a recent year, GE Capital issued $11 billion in long-term debt to investors, then within days filed legal documents to prepare for another $50 billion long-term debt issue. As a result of the $50 billion filing, the price of the initial $11 billion offering declined (due to higher risk of more debt). Bill Gross, a manager of a bond investment fund, "denounced a 'lack in candor' related to GE's recent debt deal. 'It ivas the most recent and most egregious example of how bondholders are mistreated.' Gross argued that GE ivas not forthright when GE Capital recently issued $11 billion in bonds, one of the largest issues ever from a U.S. corporation. What bothered Gross is that three days after the issue the company announced its intention to sell as much as $50 billion in additional debt, warrants, preferred stock, guarantees, letters of credit and promissory notes at some future date.

Explanation / Answer

It is not unethical. Some people are informed of these investing decisions due to the research and planned strategies they have analyzed in order to overcome the changes. Although it may seem ethical to warn or tell others of future investing plans, it is actually illegal to give away that kind of knowledge to any individual investing in the company.

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