What happened

Shares of PG&E (NYSE:PCG) fell more than 10% on Wednesday morning on investor concern that the bankrupt power provider could be turned into a customer-owned cooperative, instead of a publicly traded utility, as part of its restructuring. The talk adds a new layer of uncertainty to PG&E, and raises fresh questions about what, if any, recovery shareholders will receive as part of the reorganization.

So what

PG&E went bankrupt in January to deal with $30 billion in liabilities stemming from the 2018 Camp Fire in Northern California, and the company's shares in the months since have moved on market sentiment about how much recovery shareholders would receive. Shareholders are often wiped out in a bankruptcy, but the utility's initial plan sought to retain some value for common shares.

Power transmission poles.

Image source: Getty Images.

Events in California in the months since the filing have led to uncertainty about what PG&E will look like once it eventually emerges from bankruptcy. The stock fell last month after the judge overseeing the bankruptcy allowed alternative plans filed by creditors to be considered, a potential blow to equity holders. But the shares rallied after a mediator was appointed to work out a compromise.

The latest decline follows a San Francisco Chronicle report that mayors of at least 20 cities, including Oakland, Berkeley, Sacramento, and San Jose, have signed on to a letter urging the state to consider turning PG&E into a co-op. In such a scenario individual jurisdictions would likely be allowed to buy PG&E infrastructure within their boundaries, with the proceeds from the sales used to pay creditors.

Should the co-op model be followed there would be very little left of PG&E postrestructuring for shareholders.

Now what

No one knows how such a co-op would be structured, or even if it is viable at all. But the idea adds even more uncertainty and risk to an already tumultuous situation, and the stock is reacting accordingly.

Right now nobody knows what the future holds for PG&E, which makes the stock untouchable for long-term investors. Leave shares of PG&E for traders who are interested in speculating about what comes next.