Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of PG&E Lost More Than Half Their Value in 2019

By Lou Whiteman - Jan 8, 2020 at 2:18PM

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 utility's bankruptcy drama played out slowly as the year dragged on.

What happened

Shares of PG&E (PCG -3.29%) lost 54.2% of their value in 2019, according to data provided by S&P Global Market Intelligence, vastly underperforming the S&P 500. Considering that the California-based utility filed for bankruptcy early in the year, investors are fortunate the stock didn't fall further.

PCG Chart

PCG vs. S&P 500 data by YCharts.

So what

PG&E filed for bankruptcy in January to deal with an estimated $30 billion in liabilities stemming from the 2018 Camp Fire in Northern California. In many cases, that's the end of the story for equity holders, with shares often wiped out as part of the reorganization process. However, from the beginning, PG&E built its reorganization plan around the common shares retaining some value upon emergence.

A utility transmission pole in the sunset.

Image source: Getty Images.

There have been a lot of ups and downs along the way. The judge overseeing the case in October ruled that creditors could file a rival plan of reorganization, one that would not be so friendly to shareholders. That caused PG&E to scramble to win backing from some key creditor groups, including wildfire victims.

In December, California Governor Gavin Newsom voiced his own concerns related to governance and accountability, calling into question whether PG&E would be able to eventually access a state-managed fund being set up to help utilities handle future wildfire claims.

Now what

PG&E remains in bankruptcy protection. The company appears on track to reorganize using its own shareholder-friendly plan, but creditor groups remain opposed, and further twists are possible.

If things go according to plan, there's at least the possibility that the shares have some room to run prior to the company's emergence. But as we saw in 2019, things seldom go as planned during bankruptcy. And PG&E management might decide in the months to come to give creditors a bigger piece of the equity pie or take other actions that would eat into the value of individual shares in order to ensure a smooth exit from bankruptcy.

Long-term shareholders are not likely to be made whole regardless of what happens, with PG&E shares down more than 80% over the past three years. We're finally moving toward the closing chapters of the PG&E bankruptcy saga, but investors should probably avoid the stock until the reorganization is complete.

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
$11.74 (-3.29%) $0.40

*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 service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/21/2022.

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.