What happened

Shares of PG&E Corporation (NYSE:PCG) tumbled as much as 16.6% by 10:45 a.m. EST on Tuesday. Driving the sell-off were continued fears surrounding the embattled utility's financial situation due to its potential liability for the Camp Fire in California. 

So what 

Credit rating agency S&P Global slashed the credit rating of PG&E and its Pacific Power & Gas subsidiary from BBB- (the lowest rung of investment grade) to B, which is deep into junk territory. The rating agency made that move amid the growing uncertainty surrounding the company's liability for the deadly California wildfires. The rating reduction will make it costlier for the utility to borrow money to fund operations and for other expenses, adding to an already worrisome situation that could force the company to declare bankruptcy.

Electrician working on a power substation.

Image source: Getty Images.

Filing for bankruptcy protection is becoming an increasingly likely outcome. The company is reportedly considering this scenario to protect itself from losses stemming from not only the Camp Fire but other wildfires in 2017 and 2018. According to one report, the company could face at least $30 billion in claims due to its role in those wildfires, and that doesn't include penalties, fines, or other expenses.

Now what

It's not clear what the future holds for PG&E. While it's possible that the company could stay afloat without filing for bankruptcy, that doesn't mean its stock will bounce back. Given the current uncertainty surrounding the company's future, investors are better off avoiding this stock, since there's a real risk it could go all the way to zero.

Check out the latest PG&E earnings call transcript.

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