PG&E Stock Jumps More Than 70% Because Someone Else Was Ruled Responsible for a 2017 Fire

[mahatmakanejeeves]

Nice gain if you can keep it.

UTILITIES
PG&E Stock Jumps More Than 70% Because Someone Else Was Ruled Responsible for a 2017 Fire

By Ben Levisohn
Updated Jan. 24, 2019 4:54 p.m. ET

PG&E stock has surged more than 70% Thursday after the California Department of Forestry and Fire Protection said that the Tubbs Fire was caused by a private electrical system and not one of the utilities’ cables.

The back story. PG&E stock (PCG) had been in free fall after it was blamed for fires in California that could have left it liable for billions of dollars in damages. The company said that it was preparing to file for bankruptcy at the end of the month, though hedge fund BlueMountain Capital argued that bankruptcy was the wrong move and today said the company should replace its board.

The plot twist. The California Department of Forestry and Fire Protection issued a press release stating that the Tubbs Fire in October 2017 wasn’t caused by PG&E but by a private electrical system. That’s one less fire that PG&E is being held responsible for, and it should reduce its liabilities.
....

Moving forward. Shares of PG&E gained 75% to $13.95 Thursday following the press release, but whether or not it declares bankruptcy is still an open question—and it was even before this decision. Most stocks heading for bankruptcy trade below $1, but PG&E has consistently traded in the mid- to high-single digits, suggesting a more uncertain outcome. For most investors, however, the stock is simply too volatile to own. As if to prove the point, its stock has dropped 8.4% to $12.78 in after-hours trading.

Write to Ben Levisohn at [e-mail]

Even nicer gain:

For Some Traders, PG&E Clearance Could Mean $5.6 Million Jackpot

Cecile Vannucci
Bloomberg January 24, 2019

(Bloomberg) -- Timely trades in PG&E Corp. options may have reaped a gain of 2,800 percent after a California probe cleared the company of responsibility for a deadly wildfire.

PG&E shares jumped as California Governor Gavin Newsom said the state found that equipment owned by the utility wasn’t at fault for the second-most destructive wildfire in the state’s history, which broke out in wine country in 2017.

At 2:39 p.m. New York time -- about half an hour before that announcement -- 10,000 call options on the stock traded for $200,000 in a bet the stock would climb to $12, or more than 50 percent from Wednesday’s close, by Feb. 8. The trade was soon worth as much as $5.8 million. Reuters reported on the options activity earlier.

PG&E, which was set to file for bankruptcy to deal with crippling liabilities, hasn’t indicated it’s changing course, but the clearance may reduce its wildfire dues by more than half. The stock, which had been trading at a loss earlier in the session, then surged a record 75 percent to $13.95, above the strike of the call.

The Feb. 8, $12 calls changed hands for 20 cents each and rose to as much as $5.80 before ending the day at $3.68. This means the investor or investors could have made $5.6 million from the trade, a 2,800 percent gain. Before Thursday, only 109 of those options existed, data compiled by Bloomberg show.
....

To contact the reporter on this story: Cecile Vannucci in Hong Kong at [e-mail]

To contact the editors responsible for this story: Divya Balji at [e-mail], Joanna Ossinger, Teo Chian Wei

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.

[still_one]

1. PG&E has a lot of issues which they are liable for. Those who are jumping on this are ignoring some

very important things hanging over PG&E, and I think the probability is quite high they will have to declare bankruptcy

[mahatmakanejeeves]

2. I should point out that I don't own any, other than what shows up in an index fund.

I'm staying away from this one. Sometimes it's fun to play "catch a falling knife," but far more often than not, that strategy doesn't end well.

Thanks for writing.

[still_one]

3. If you are inclined to dabble a little in that approach, I think GE might be a better bet, at least

that is where I would be inclined to speculate

[Auggie]

4. Profiteering. The stock will tank again: Still liable for fires Camp, Atlas, Nun, and many more.

[mahatmakanejeeves]

5. Are you going to short it at this point? NT

[Auggie]

6. I don't own any PG&E stock that I know of ...

there might be some in one of my several index funds but I haven't bothered to check.

Point is, PG&E is going to have to answer for the Camp fire and the deaths in Paradise, CA. Plus the other wine country fires and deaths from 2017.