- Pacific Gas and Electric Company, California’s biggest utility provider, has seen its value plunge by 80% after last November’s deadly California wildfire.
- The utility on Monday said it intends to file bankruptcy petitions at the end of the month to reorganize under Chapter 11.
- Eight hedge funds snapped up shares in the third quarter — before the wildfire broke out.
- Including Monday’s loss, those eight firms would have lost $1.8 billion over the past three months if they held on to their positions, according to Markets Insider’s calculations.
Pacific Gas and Electric Company (PG&E), California’s biggest utility provider, has seen its value plunge after last November’s wildfire, the deadliest and most destructive in California history. And eight hedge funds, which loaded up on PG&E shares in the third quarter, could be have lost billions as a result.
The past three months have been a tough time for PG&E:
- On November 8, the deadliest and most destructive wildfire in California history broke out. PG&E said it was having trouble with its transmission lines when the blaze erupted, and that it may be responsible.
- In mid-November, people who lost their homes in the fire sued the company, alleging it was a „direct and legal result of the negligence, carelessness, recklessness, and/or unlawfulness.“
- A month later, The California Public Utilities Commission opened a proceeding into the company falsifying safety documents for natural gas pipelines between 2012 and 2017.
- PG&E announced on January 4 that its board of directors would review the company’s management, finances, governance, and structural options, prompting media to speculate that it was considering filing for bankruptcy protection, as it feared a massive charge related to billions in costs associated with the wildfire.
- All the bad news led the credit-rating agency Standard and Poor’s to downgrade the PG&E to junk last Tuesday.
- And things have gone from bad to worse this week. On Monday, PG&E tanked 48% to $9.04 a share after the company said it intends to file bankruptcy petitions at the end of the month to reorganize under Chapter 11. The utility is also searching for a new CEO following the departure of its previous executive leader Geisha William.
With shares sliding 80% since November, PG&E has become a toxic investment for its shareholders. Markets Insider looked at the nine hedge funds with the largest holdings in the utility. Of those, only DE Shaw sold shares in the third quarter. The rest added to their holdings.
By Markets Insider’s calculation, if these eight firms held their entire positions through Monday, they could have lost $1.8 billion over the past three months.
The firms could have sold their shares before the fire, or in the immediate aftermath, avoiding some of the decline. And they could have hedged their positions, offsetting any losses.
Below are eight hedge funds that loaded up on PG&E at exactly the wrong time, in ascending order of their positions since their last disclosure.
Position: 2,381,220 shares
Percent of PG&E outstanding: 0.46%
Position change in the third quarter: +1,494,725
Potential loss: $86.4 million
Millennium Management declined to comment on its investment in PG&E.
Position: 2,864,617 shares
Percent of PG&E outstanding: 0.55%
Position change in the third quarter: +915,781
Potential loss: $104 million
Citadel did not immediately respond to request for comment.
Position: 3,991,033 shares
Percent of PG&E outstanding: 0.77%
Position change in the third quarter: +2,197,066
Potential loss: $144.9 million
Appaloosa did not immediately respond to request for comment.
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Source: Business insider