Reuters
- PG&E shareholders were dealt a blow on Wednesday when a California judge stripped the utility giant of exclusive control over its bankruptcy process.
- The decision clears the way for a rival bankruptcy plan that favors bondholders.
- The company also recently turned off power for 800,000 customers in Northern California due to severe weather. Power remained off until late Thursday.
- Shares fell 32% Thursday following the news.
- Multiple Wall Street analysts say the stock could fall to zero.
- Watch PG&E trade live on Markets Insider.
Wall Street is worried that California utility giant PG&E could erase all market value and eventually see its stock fall to zero.
Shares of the company fell as much as 32% Thursday, extending a sell-off that began the prior day after a judge in California stripped the utility giant of exclusive control over its bankruptcy process. That opened the door for bondholders like Elliott Management to pitch their own plans, according to the Wall Street Journal.
Also on Wednesday, PG&E turned off power for nearly 800,000 customers in Northern California due to a "widespread, severe wind event" the company said in a release. The wind was viewed as a potential catalyst for more wildfires. Late Thursday, the company began to restore power in the region.
These latest developments have experts on Wall Street growing increasingly hesitant around the stock.
Analysts led by Praful Mehta at Citigroup say there's a 75% chance PG&E's stock plummets all the way to zero. The firm slashed its 12-month price target to $5 and expressed surprise that the judge took away PG&E's right to control its own bankruptcy.
Morgan Stanley also thinks that shares could fall to zero if the bondholder plan is confirmed, analyst Stephen Byrd wrote. The creditor's plan leaves little equity value, he said, meaning that there's "heightened uncertainty in the process as a result." The firm its price target to $16 from $23 and reaffirmed its equal weight rating.
PG&E's troubles started in late 2018 after its equipment was faulted in a range of California wildfires that killed as many as 22 people. The fallout involved the utility provider filing for bankruptcy in January, citing $30 billion in liabilities.
Investigators are still determining PG&E's involvement in a number of other deadly and highly destructive wildfires in California, according to the WSJ.
PG&E is down 65% year to date.
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