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Why PG&E Stock Popped 11% This Morning

By Rich Smith – Updated Apr 20, 2019 at 12:58AM

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Because of short-sellers? Aliens? Your guess is as good as anyone else's.

What happened

The bad news surrounding PG&E Corporation (PCG -0.96%) -- the California electric utility at the center of controversy because of its role in last year's Camp Fire wildfire, as well as an apparent imminent bankruptcy case -- just keeps getting worse. Yesterday, S&P downgraded PG&E's debt from CC to D, or basically from "junk bonds" to "just plain trash." Today, analysts at RBC Capital Markets followed up with a reduction in their price target on PG&E stock: from $45 to ...

... just $8 even.

Despite all the negative news, PG&E stock jumped as much as 11% in early trading today and remains up 9.7% as of 11 a.m. EST. Why?

Utility power lines.

Don't be fooled by a sucker rally. The sun is setting on PG&E stock. Image source: Getty Images.

So what

Honestly, there doesn't seem to be a good reason for PG&E stock going up so much on no good news and more than a little bad news. My best guess at this point is that some investors who (rightly) predicted PG&E's downfall and shorted the stock are now collecting their winnings by buying back the shares -- which has the effect of bidding up the price of PG&E stock.

Now what

If I'm right about that, though, then the share price strength at PG&E won't last long. A higher price, but one unsupported by good news giving reason to believe PG&E shares will be worth anything after bankruptcy, is only going to attract new short-sellers to drive PG&E stock right back down again.

My advice? If you own PG&E stock, you've probably already lost a lot of money. Don't get suckered in by this latest rally and risk losing even more.

Check out the latest PG&E earnings call transcript.

Rich Smith 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.

Stocks Mentioned

PG&E Stock Quote
PG&E
PCG
$15.42 (-0.96%) $0.15

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

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