PGE Crash and Burn or Phoenix?
PGE, will it crash or burn and disappear or will it survive and be severely crippled company from here on out? What do you guys think?
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Personally I think the common is still super cheap even at around 10 (or wherever it is today). Whole company is trading at only about 7x EBITDA...most utilities trade at 12xish....so there's some upside there. Also the company is trading for less than book value (which is assuming the Company is responsible for the FULL wildfire burden, not the recent settlement figure) which helps.
On the flipside, it's an extremely complicated situation, given it's a chapter 11 and all of the regulatory BS that's needs to go the right way for the equity to fully recover (See: California's governor denying their reorg plan??? wtf).
Also, the equity will get diluted in the reorg; I just don't know how much. Some of the world's most aggressive HFs have piled into PG&E's debt and I don't see a way in which they walk out of that court room without getting a serious chunk of equity. I saw an article the other day that said that equity holders could get fully wiped. Is this true? I would think given the Company's plentiful assets that it would be tough to pass a reorg plan that wipes out equity completely that would pass the Best interest of creditors test. Not really sure though that not my forte.
Overall, I think the stock is priced nearly where it would be given the worst possible outcome for equity holders. The company used to trade for nearly $70/share not too long ago, so I believe the upside outweighs the risk. Curious to see others' thoughts are though. There's smart funds on either side of this debate.
I definitely think shareholders won’t get anything if they were in back when it was @70 I for one have been shorting PCG and making money on the price swings.
I believe the HFs will take all the value and be out before the stock reaches 40 and it’ll tank from there I think it’ll survive because the other utilities in Cali can’t take PCGs place as they don’t have the resources to meet the capacity.
I think Seth Klarman will clean up nicely since buying those insurance claims a little over .30 cents and getting them paid out at close to .60 cents on the dollar. Interested to see how well Elliott and PIMCO do.
Didn't Baupost have a pretty sizable long position in PG&E a couple of quarters ago when the stock was trading around $20/share? The payout from the lawsuit probably just lessened their losses a bit. Pretty sure they got hit hard by their long position going sideways
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