Analyst On PG&E Stakeholders: 'Someone Needs To Compromise'

California Gov. Gavin Newsom on Nov. 1 stated if utility company PG&E Corporation PCG is unable to "secure its own fate and future," then the state will "do the job for them" in the wake of wildfires.

What Happened

PG&E has until June 2020 to resolve its bankruptcy, but the company is in a difficult position as it faces off against shareholders and bondholders each with different positions, Citi analyst Praful Mehta told Yahoo Finance. Bondholders' proposal for PG&E implies shareholders will see their investment "completely diluted."

"You are trying to have this global settlement to ensure everyone comes together so you can get this process moving forward and you can allow for PG&E to exit by June 2020," Mehta said. "That's the governor's goal, but it is extremely difficult, in my view, to get these two parties together."

Why It's Important

Mehta said all stakeholders share a common goal in making sure PG&E meets its 2020 deadline but "someone needs to compromise." It's not clear which side will be forced to compromise and for the time being the state of California doesn't have a "credible plan" to step in.

Current estimates place a 75% likelihood the bondholders plan will succeed, which would imply the stock gets "diluted to zero." If PG&E's stockholders succeeds, shares could be "worth about $20 to $22 a share."

PG&E's stock traded around $7.86 per share at time of publication. The stock has a 52-week high of $49.42 and a 52-week low of $3.55 a share.

Related Links:

Analyst: Wildfires Raise Chance Of PG&E Shares Falling To Zero

$0 Or $40? PG&E Price Targets Reflect Uncertain Outlook On Wall Street

Photo credit: Frank Deanrdo, Flickr