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PG&E Stock: Has Santa Claus Come Early This Year?

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  • PG&E is close to reaching a resolution about how to compensate wildfire victims.
  • The step would be a big positive in order to settle the company’s bankruptcy.
  • PG&E stock rose due to the news and gained as much as 25% on Wednesday.

Recently, PG&E (PCG) stock continued to rise. The stock has gained in seven of the last eight trading sessions. Collectively, the stock has risen more than 30%. On Wednesday, PG&E stock rose as much as 25% and fell later in the session. The stock closed at $9.47 and ended the day with a gain of around 11%. On Wednesday, the stock rose after PG&E said that it’s close to finalizing terms to pay its wildfire victims. The resolution would be a big step towards resolving the company’s bankruptcy.

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PG&E nears a resolution

According to a Bloomberg article on Wednesday, PG&E is close to finalizing terms for a $13.5 billion payout structure to wildfire victims. The company would pay half of the amount in cash, while the rest would be paid in the reorganized utility’s stock. However, the talks are in the final stages. The talks could still fall apart if there’s a disagreement. Due to PG&E’s equipment, the company is responsible for the deadly wildfires last year.

PG&E has a deadline of June 30, 2020, to exit Chapter 11 bankruptcy. The utility has been struggling to devise a reorganization plan for months. Notably, resolving the wildfire claims could be a key step in settling the company’s bankruptcy.

PG&E filed for bankruptcy when wildfire-related liabilities reached $30 billion. Camp Fire, the deadliest wildfire in California’s history, killed 85 people and destroyed many structures last November.

Bankruptcy

The bankruptcy court judge allowed an alternative reorganization plan from PG&E’s creditors to be considered in October. The utility’s creditors include Elliott Management and Pacific Investment Management Company. The news was a big blow to PG&E shareholders. The court’s decision could completely wipe out shareholder value. However, the utility raised its compensation to wildfire victims to $13.5 billion, which is equal to what creditors offered.

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PG&E’s stock price action

With these favorable developments, PG&E stock showed a notable revival in November. The stock hit an all-time low of $3.55 in late October and rose to levels close to $10.7 on Wednesday—almost a 200% return in just over a month.

PG&E stock also witnessed a huge surge in its volume. On Wednesday, more than 61 million shares exchanged hands compared to the stock’s three-month daily trading volume of 19 million. The stock has been volatile most of this year. Interestingly, the stock might continue to trade volatile until it emerges out of bankruptcy.

PG&E stock has been extremely weak in the last year. Since last November, the stock has lost more than 65%. In comparison, Sempra Energy (SRE) and Edison International (EIX), peer utilities operating in California, have risen 35% and 25%, respectively, this year. Broader utilities have risen almost 20% during the same period.

Read Utility Stocks: Is There Any Steam Left in These Defensives? to learn how utilities (XLU) performed this year and how they’re placed ahead.

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