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What’s in Store for PG&E and Its Investors in 2020?


Jan. 3 2020, Published 12:46 p.m. ET

This year is going to be crucial for PG&E (PCG) and its investors. The utility has a deadline of June 30, 2020, to exit Chapter 11 bankruptcy. PCG stock corrected more than 50% last year. However, it surged more than 40% in December on improved prospects of exiting bankruptcy.

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PG&E stock had a volatile 2019

Last year was tumultuous for PCG stock. It fell from close to $24 to $6 just before the company filed for bankruptcy in January 2019. Amid the bankruptcy proceedings, the stock once again surged, reaching $24 in June, before falling back to $3.60 in October. With the company’s recent settlement with wildfire victims, the stock is currently trading close to $11.

PG&E filed for bankruptcy last January when its wildfire-related liabilities soared to an estimated $30 billion. The utility’s power lines were blamed for starting California’s deadliest wildfires ever in November 2018. The fires killed around 85 people and caused extensive damages.

PG&E and its race to exit bankruptcy

In a major win, PG&E received a bankruptcy court’s approval last month for its $24 billion settlement with wildfire victims and insurance companies. However, new uncertainties poured in when California governor Gavin Newsom rejected the utility’s restructuring plan. Newsom’s support is crucial for PG&E to exit bankruptcy.

Common stocks generally lose their value completely during bankruptcy proceedings. However, investors seem hopeful about PCG stock. The utility filed for bankruptcy in 2001 as well and didn’t withdraw its common stock. Investors reaped significant returns in the next few years after its reorganization. Investors might be hoping for something similar this time.

PG&E’s fight intensified last month when a group of creditors sweetened their offer to wildfire victims. The creditors offered to pay $13.5 billion in cash. Their restructuring plan includes some terms Newsom was expecting in PG&E’s plan.

PCG stock’s price action

PG&E stock had a roller coaster ride throughout 2019. Its bankruptcy proceedings will likely be a key driver for its stock going forward. The stock could stay volatile, considering the complicated bankruptcy process. Whereas PCG stock fell more than 50% last year, utility stocks had a decent run overall, gaining 22% on average. California utilities Edison International (EIX) and Sempra Energy (SRE) soared 30% and 40%, respectively, in 2019.

All ten Wall Street analysts tracking PCG stock recommend “hold.” Their mean target price of $14.40 implies an upside of more than 30% in the next year.


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