Shares of PG&E (PCG) are sliding after a U.S. Bankruptcy Court judge in San Francisco allowed PG&E to hold on to sole rights to construct a chapter 11 exit plan but also allowed the Tubbs fire to be tried in jury trial in California state court. Following the news, Citi analyst Praful Mehta double downgraded the stock to Sell saying that the Tubbs fire is "too big" and a jury trial is "too risky."
BANKRUPTCY COURT DECISIONS: A U.S. Bankruptcy Court judge in San Francisco allowed PG&E to hold on to sole rights to construct a chapter 11 exit plan, Peg Brickley of the Wall Street Journal reported. The judge turned down requests from two groups of creditors who have been gathering billions in financial commitments to support their versions of a chapter 11 exit strategy for the company. Facing approximately $30B in damage claims, PG&E outlined a chapter 11 exit strategy that it expects will bring in new money and protect share value. PG&E intends to take the first step to get it out of chapter 11, in filing that plan, by September 9.
In a separate decision, the judge ruled that the company must face a jury in California in a trial that will test whether it is liable for damage from the Tubbs fire, one of the largest and most lethal of the blazes that swept the state in 2017 and 2018, and sent PG&E to bankruptcy, Brickley wrote. California fire investigators concluded PG&E equipment didn’t spark the Tubbs fire, but lawyers for insurers and fire victims say they can prove otherwise.
SELL PG&E: In a research note to investors, Citi's Mehta double downgraded PG&E to Sell from Buy, after a U.S. Bankruptcy Court judge in San Francisco allowed the company to hold on to sole rights to construct a chapter 11 exit plan but also allowed the Tubbs fire to be tried in jury trial in California state court. The Tubbs fire, which could amount to an incremental $15B in total liabilities for PG&E, is "too big" and a jury trial is "too risky," Mehta said. The analyst also lowered his price target on PG&E shares to $4 from $33, stating that the difference in target is due to now incorporating $15B of Tubbs wildfire liabilities in his estimates.
PRICE ACTION: In morning trading, shares of PG&E have dropped almost 28% to $10.34.
PG&E
-4.09 (-28.60%)