Please ensure Javascript is enabled for purposes of website accessibility

Why PG&E Stock Popped 12% This Morning

By Rich Smith - Oct 4, 2019 at 12:08PM

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

A lawsuit raises hopes that there may be more money left over for stockholders.

What happened

Shares of bankrupt electric utility PG&E Corporation (PCG 2.14%) stock are getting a lift this morning. Down 82% over the last couple of years, PG&E shares are up 8% (as of 11:15 a.m. EDT), apparently in response to a lawsuit filed in California by consumer rights group the Utility Reform Network.

As Bloomberg reports today, the group is challenging the fees charged by law firms working on the PG&E bankruptcy, alleging that "overstaffed meetings ... questionably high hours and submitted travel and meal expenses" have inflated the company's legal bills and "shouldn't have been allowed."

Judge banging a gavel

Image source: Getty Images.

So what

True or false, these allegations are being made by a consumer rights group presumably more interested in saving money for consumers than in saving money for shareholders, so you might not expect this news to affect PC&G stock.

But as my fellow Fool Lou Whiteman pointed out last month, PG&E has already reached a legal settlement with 85% of the plaintiffs demanding compensation for PG&E's role in the California Camp Fire "and other fires in 2017." By limiting the damages PG&E might be exposed to, and opening the possibility that insurance coverage could pay the bulk of the claims made against the company, that settlement alone put PG&E "on track to emerge from bankruptcy without wiping out its shareholders."

That fact alone probably increased investors' willingness to take a flyer on the stock, now that it's down so much already.

Now what

And now we have this consumer rights group working to reduce PG&E's costs even further. Granted, it's not likely legal costs were going to rise to the level of the $11 billion settlement on the insurance claims, and any savings on law firm fees will probably pale in significance to the savings already secured. But money's still money, and if this new lawsuit means PG&E gets to keep even more of it, that increases even further the likelihood that shareholders won't be entirely wiped out when this whole bankruptcy business winds up.

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.

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 Corporation Stock Quote
PG&E Corporation
PCG
$12.39 (2.14%) $0.26

*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
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/16/2022.

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.