With PG&E Corporation PCG filing for bankruptcy Tuesday, Morgan Stanley outlined six major questions going foward about the California utility in a new research report.
The Analyst
Analyst Stephen Byrd reiterated an Equal-Weight rating on PG&E with a $17.50 price target.
The Thesis
A high probability exists that the court will reject PG&E’s filing given that it may not comply with bankruptcy law that restricts solvent companies from strategic filings, Byrd said in a Tuesday note.
“We believe there is a meaningful probability that a court would reject a PG&E Chapter 11 filing on the ground that the company is solvent and that PG&E is filing Chapter 11 to achieve tactical litigation advantages,” the analyst said.
The answers to the following six questions will ultimately determine PG&E investors’ fate, Byrd said:
- Will the court reject the PG&E bankruptcy filing?
- How will California legislators approach future wildfire liability?
- Are there effective ways to reduce the risk of wildfire liability?
- Could PG&E successfully separate its federal assets from its state-regulated assets to shield them from liability?
- Will PG&E be held liable for the 2018 Camp Fire if the company’s behavior and handling of its equipment is not found to be negligent or imprudent?
- Will the CPUC stress test continue now that PG&E has officially filed for bankruptcy?
- Too many unknowns are in play for PG&E to predict where the stock is headed in the near-term, according to Morgan Stanley.
Price Action
PG&E stock was up 13.16 percent at $13.59 at the time of publication, but is down 72.3 percent overall in the past three months.
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