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EMAILED ON January 15, 2019 BY Conor Grant

PG&E shares fell 50% yesterday after the utility announced it will file for bankruptcy

Shares of PG&E, the largest utility company in California, fell 50%+ yesterday after PG&E announced it will file for bankruptcy protection.

Just months ago, PG&E was a hot investment. But regulators are holding PG&E responsible for several deadly California fires, and now it’s struggling to pay the billion-dollar bills.

It costs a lot to upgrade old equipment…

But, as it turns out, it costs even more to rebuild scorched cities. The past 10 years have been the driest in California history, making PG&E’s old, spark-prone wires more dangerous than ever.

While PG&E has spent millions trying to upgrade its equipment, it hasn’t been able to keep up: PG&E equipment was responsible for 1,550 fires between 2014 and 2017.

Since California state law makes utilities responsible for fires started by their equipment, the increase in damaging wildfires has resulted in an increase in financial fires at PG&E.

Fires spread fast

According to analysts, PG&E’s liabilities could exceed $30B, while the company’s entire market value is just $9.12B.

PG&E’s disaster happened quickly: Several hedge funds invested money in the utility just a few months ago in the 3rd quarter of 2018.

But since October, the company’s market value fell from $25.32B to $9.12B today. Today, a 2015 investment in the utility (which would have been seen as a very safe bet at the time) delivers a -80% return. 

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