General Electric (GE) fell the most in four months after a prominent whistleblower working with a short-seller accused the company of masking financial problems.
The company called the claims “meritless”.
Harry Markopolos, who had raised concerns over investment manager Bernie Madoff before his Ponzi scheme was exposed, said GE has understated liabilities in its insurance unit and hasn’t properly accounted for its investment in Baker Hughes.
Mr Markopolos said GE’s insurance unit will need to increase its reserves immediately by $18.5bn in cash with an additional noncash charge of $10.5bn when new accounting rules take effect in 2021.
He also alleged that GE isn’t properly accounting for its interest in oil services firm Baker Hughes.
The US manufacturer defended its accounting.
“GE operates at the highest level of integrity and stands behind its financial reporting,” the company said. Mr Markopolos is working with a hedge fund he didn’t identify and stands to benefit from bets that GE’s stock will decline, according to The Wall Street Journal.