Finance: What is Disinvestment?

What is Disinvestment? Disinvestment is essentially a $5 word for sell off. It usually refers to a company liquidating aspects of its asset portfolio. While it can mean tradable securities, it can also refer to subsidiaries or divisions that no longer fit the company’s future business plans. An example would be General Electric, when it sold off its appliance and GE Finance divisions to focus on energy and jet engine manufacturing.

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Transcript

00:26

world actually works like the little rich kid who complains to Daddy about

00:30

the underpaid workers in his shirt factory as the kid drives away that [Boy driving sports car]

00:35

shiny new convertible BMW with the you know souped-up stereo set yeah that's

00:40

kind of what it's like well students often protest universities investing in

00:44

things like tobacco and oil and types of technology companies and that's really

00:49

kind of funny and sad because you know students late teenagers really have tons

00:54

of professional investment experience and life experiences and they've seen

00:59

lots of market cycles and they really know what they're doing when it comes to

01:04

the long cycles of the stock market and or they're advised by professors who [Woman working on laptop]

01:10

really have risked their own capital to build a big oh wait there none of that

01:14

so yeah that's the funny part and the sad part is that well for better or

01:18

worse over time those industries that they want to boycott for their school's

01:23

endowment which then pays for scholarships for underprivileged kids

01:27

have traditionally been really good industries to invest in like they've had

01:31

good investment returns yeah like technology come on give me a break just

01:35

goes up right so when the students push the university to sell its point zero

01:40

zero zero one percent ownership of their stake in whatever company well then the

01:46

university loses those good investment gains and that endowment money that was [Money vanishes from vault]

01:50

supposed to be earmarked for scholarships for the underprivileged not

01:55

the children of rich daddies in you know BMWs while that money just isn't there

02:00

just goes away so who did all that disinvestment hurt well students five

02:04

ten twenty years later who actually needed the scholarship money and didn't

02:09

get it but at least the boycott really affected how Chevron drilled for oil there

02:13

right [Chevron drills hole into sea bed]