Please ensure Javascript is enabled for purposes of website accessibility

How Should Shareholders Handle PG&E's Bankruptcy Filing?

By Motley Fool Staff – Updated Apr 19, 2019 at 11:39PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The liability related to its share of responsibility for the California wildfires has the electric utility in high-risk limbo.

Check out the latest PG&E earnings call transcript.

Sometimes, it's possible to see a troubled company's trajectory toward Chapter 11 from miles away. In the case of utility company PG&E (PCG -0.65%), the disaster was not truly obvious until it was almost too late to react. Now that its share price has cratered from the high $40s in November to single digits this week, the question for anyone who rode it all the way down (thinking, perhaps, that California wouldn't let the company implode) is: What to do now?

In this segment from MarketFoolery, host Chris Hill and Fool.com contributor Dan Kline discuss PG&E and how to handle such troubled assets more broadly.

A full transcript follows the video.

10 stocks we like better than PG&E
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and PG&E wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of November 14, 2018

This video was recorded on Jan. 14, 2019.

Chris Hill: PG&E is filing for bankruptcy because of the liability around the wildfires in California. Not surprisingly, shares of PG&E down 50% today. Again, this is not a surprise. I'm curious if you've ever found yourself in this situation. This is a question we've gotten before from not just investors in PG&E, but investors in a distressed business. You could look at Sears at any point over the last 12 months. What's your go-to move in that situation as an investor? Even though I've got a couple of stocks in my portfolio that are way down, they're not on the verge of bankruptcy or anything like that. I'm loath to sell them. I think if I were in this situation, I would look to cut my losses.

Dan Kline: First of all, if you're in this situation, forgive yourself. This isn't bad prognostication. This isn't, you really believed Sears' strategy of doing absolutely nothing would turn their business around. This is liability in a disaster. Maybe, if you knew each member of management personally, you might have known, but there was no way. Let it go.

Then, get out the best you can. Holding on to the stock...there's not going to be a turnaround. These assets will all be sold because this company does need to still operate -- at least, these services need to be provided.

Hill: It's a utility.

Kline: But, three years from now, when they've figured it out, when the last PG&E desk chair is sold and there's a fund, the fund is not going to pay back stockholders. You don't want to be waiting to get your $0.02 on the $1.00. Just get out. Call it a lesson learned. Hopefully, you have some gains to offset those losses.

Hill: Right. We were talking earlier, I was saying, "Gosh, if you're in this situation with PG&E, maybe one of the silver linings is the timing of it all." We're a couple of weeks into the year. If you're selling now, then you've got 11 months to look at your portfolio and think, "Is there something I want to sell at a gain? These losses will offset that and I'm going to have a very attractive tax bill." And by very attractive, I mean, maybe you're paying nothing for capital gains.

Kline: You have to look on the bright side because this isn't good for anybody.

Chris Hill has no position in any of the stocks mentioned. Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

PG&E Stock Quote
PG&E
PCG
$15.27 (-0.65%) $0.10

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.