GE will be jettisoned from the Dow Jones Industrial Average (DJIA) on June 26, the latest sign of struggles at the once-mighty conglomerate.
S&P Global, the company that administers the index, announced on June 19 that it will replace GE with Walgreens Boots Alliance, operator of the Walgreens chain of drug stores. GE was an original component of the DJIA in 1896 and has been a member continuously since 1907.
In making the move, S&P Global noted that the U.S. economy has changed over the past 100 years, with industrial companies like GE becoming less important and consumer, finance, healthcare, and technology companies rising in importance. The move will make the DJIA more representative of the U.S. economy and the stock market, the company said.
S&P Global noted that the DJIA is a price-weighted index, so the range of prices in the 30-company index is important.
"The low price of GE shares means the company has a weight in the index of less than one-half of one percentage point," it noted.
Meanwhile, Walgreens will contribute more meaningfully to the index because its share price is higher.
GE has been struggling and its stock price has fallen since revelations in 2017 of a large one-time charge to write off liabilities related to a long-term care insurance business that it has sold off. The firm's cash-flow woes have led to speculation that it would have to sell off some of its divisions, although CEO John Flannery has said that healthcare will remain a key part of the GE's operations going forward.
