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PG&E Stock Is on Fire, Judge Approves Wildfire Settlement

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  • PG&E stock is trading higher today. A judge approved the company’s settlement with California wildfire victims. The stock gained 12.8% during trade on Tuesday. Now, the stock has risen 46% this month based on Tuesday’s closing prices.
  • However, the stock is still down 54% year-to-date. In October, California Governor Gavin Newsom said that Warren Buffett, Berkshire Hathaway’s chairman, should bid for the utility.
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PG&E stock is on fire

PG&E stock (PCG) opened higher today. According to a CNBC report, “A U.S. bankruptcy judge approved on Tuesday PG&E’s $13.5 billion settlement with victims of Californian wildfires.” In addition, CNBC reported that Judge Dennis Montali “also approved an $11 billion agreement with insurance companies, locking up the last and two most significant creditor groups.” So far, PG&E stock has been on a fire this month. Based on Tuesday’s closing prices, the stock has gained 46% in December. Read PG&E Stock: Has Santa Claus Come Early This Year? to learn more.

Criticism from California’s governor

CNBC also reported that Newsom’s lawyer, Nancy Mitchell, thinks that the settlement is “fair.” Notably, Newsom has been critical of PG&E. Read PG&E Faces Moment of Truth, Newsom Rejects Plan to learn more. In October, Newsom floated the idea that Warren Buffett should bid for the company. Berkshire Hathaway already has utility companies in its portfolio. Currently, Berkshire Hathaway is sitting on a record $128 billion cash pile, according to its third-quarter filings. Buffett hasn’t been able to find an “elephant-sized” acquisition to deploy that cash. Also, rising valuations don’t make many stocks attractive for Buffett. He’s known for his value investments.

Analysts’ ratings of PG&E

Nine analysts covering PG&E have rated it as a “hold” or some equivalent. The remaining analyst polled by Thomson Reuters rates PG&E as a “strong sell.” The stock’s mean consensus target price of $14.17 represents a potential upside of 17.6% over its closing prices on Tuesday. The stock has fallen 54% this year despite strong returns in December.

We’ll have to see how Elliott Management reacts to the news. The hedge fund is among PG&E’s biggest creditors. Elliott Management hasn’t been too excited about the settlement plan. The hedge fund also plays the role of “activist investor.” Elliott Management was among the drivers for Alcoa’s split that was completed in 2016. Read Paul Singer and Elliott Management’s Top Holdings to learn more.

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