PG&E’s stock has lost more than half its value this week as shareholders flee the utility amid concerns that its equipment may be partly responsible for the most destructive wildfire in California’s history.
Shares plunged another 24 percent to under $20 per share on Thursday after PG&E lost 21 percent in the prior session. The exodus from the utility began in earnest on Wednesday after the company said that, if its equipment is found responsible for the so-called Camp Fire in Northern California, the costs would exceed its insurance coverage and impact its financial well-being.
The plunge in the company’s stock erased $3.7 billion in value on Wednesday as its market cap slid to $13.3 billion from $16.9 billion. The company’s value fell another $3 billion Thursday to about $10 billion. It’s now down 51 percent this week.
PG&E, owner of Pacific Gas & Electric Co., said in a government filing Tuesday that its subsidiary has drawn down $3 billion from its credit line in anticipation of a fire-related liability. At least 56 people have died in the fire and a record 8,756 residences have been destroyed, according to official estimates.
The conflagration is 40 percent contained and has burned more than 140,000 acres as of 7:18 a.m. PST.
Though the cause of the Camp Fire remains under investigation, the utility company also said that it submitted an “electric incident report” to the California Public Utilities Commission on Nov. 8, just before the wildfire. The report indicated a power failure on a transmission line in Butte County at 6:15 a.m. PST that day. The fire was reported at approximately 6:30 a.m. PST, according to state records.
More and more Wall Street analysts cut estimates for PG&E on Thursday, with Morgan Stanley echoing earlier Citigroup fears that the frequency and severity of fires may spook shareholders out of the stock.
“We think major investment uncertainties (regulatory evaluation, questions around liquidity needs, uphill legislative path, and persistent fire risk) present barriers to investors owning PG&E,” Morgan Stanley analyst Stephen Byrd wrote to clients Thursday.
“We think the frequency and extent of severely damaging fires, as well as the financial market’s loss of confidence in the California utility stocks, highlights the urgent need for new legislation to better protect utilities from the risk of financial distress and utility shareholders from potentially unlimited fire liabilities,” Byrd added.
Byrd downgraded the stock to equal-weight and cut his price forecast for shares to $31, implying 58 percent upside from current levels, just under $20 per share.