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Bankruptcy Fears Take Charge: PG&E Stock Fell 30% Last Week

Vincent Kruger
Bankruptcy Fears Take Charge: PG&E Stock Fell 30% Last Week

Utilities: Analyzing Gains and Losses Last Week(Continued from Prior Part)## PG&E PG&E (PCG) shares continued to dig deeper last week. The big fall in PG&E stock, driven by bankruptcy fears, got worse after a flurry of rating downgrades last week. Moody’s and S&P Global Ratings downgraded PG&E to “junk” last week citing potential liabilities related to wildfires and regulatory pressures, based on Reuters reports. PG&E has lost more than 60% in the last two months—almost $15 billion of its market cap.## Hard times ahead PG&E is facing a multi-billion dollar liability related to wildfires in 2017 and 2018. Bankruptcy isn’t clear yet. In November, the utility reported that its existing insurance wouldn’t be enough to cover the liabilities. The wildfire-related liabilities could have a material impact on the company’s financial condition.The wildfire called “Camp Fire” started on November 8. Camp Fire, the deadliest wildfire in California’s history, killed at least 86 people. PG&E was held responsible for starting wildfires in 2017. In 2018, PG&E reported more than $2 billion in charges related with the wildfires in 2017.## Stock updatePG&E stock continues to look weak. The large discount to PG&E’s 50-day and 200-day moving average levels highlights substantial weakness in the stock. The stock has been trading in the “oversold” zone for a while now with its relative strength index at 17. PG&E’s implied volatility touched 118% last week. The implied volatility shows investors’ anxiety. An increase in the volatility is usually related to a fall in stock prices. In comparison, utilities (XLU) at large witnessed an implied volatility of 16%, while the S&P 500’s implied volatility was 15%.Continue to Next PartBrowse this series on Market Realist: * Part 1 - Utilities: Analyzing Gains and Losses Last Week * Part 3 - XLU: What to Expect from Utility Stocks * Part 4 - Dividend Yields: Analyzing Top Utility Stocks