What happened

PG&E (NYSE:PCG), the nation's largest electric utility, filed for Chapter 11 bankruptcy protection today. Its stock rose 16.5%.

So what

Yes, you read that right, and, yes, I realize that doesn't seem to make much sense (unless, of course, what we're seeing here is simply short-sellers "closing" their shorts by buying back shares previously shorted, in which case it would make a lot of sense).

Yet some analysts were saying today that despite PG&E's being now officially "bankrupt," they don't believe shareholders will be entirely wiped out -- i.e., PG&E stock might not go to zero. For example, Morningstar  says it believes there will still be $12.50 worth of "fair value" left in PG&E stock, even after it pays off all its creditors and settles all its claims for wildfire damages -- and, indeed, that the stock could be worth as much as $20 per share.

Electric towers and lines

PC&G's stock may or may not be worth anything after bankruptcy, but its infrastructure will remain. Image source: Getty Images.

Now what

Despite this contrarian argument for buying PG&E, the utility stated that it has assets worth $71.39 billion and liabilities of $51.69 billion -- and could still be liable for close to $30 billion in fire-related damages. That seems to imply that the stock going to zero remains a distinct possibility.

Unless you have a good mathematical argument for believing it won't -- "hope" doesn't count -- it's probably best to ignore today's rebound and avoid this stock.

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.