PG&E Investors Breathe Sigh Of Relief

Well, at least one overhang has been removed for PG&E Corporation (NYSE: PCG).

The California Department of Forestry and Fire Protection said Thursday afternoon the October 2017 Tubbs fire was caused by a private electrical system. The department said investigators didn't identify any violations of state law related to the the fire's cause.

As this news broke, PG&E was halted on a circuit breaker at 3:14 p.m. ET. The stock resumed trading a few minutes later, but has been halted two more times at time of publication. Shares were up 76 percent to $14.18.

Investors could be reading this as a positive sign regarding the 2018 California wildfires, as PG&E's stock had dropped nearly 90 percent over the last three months.

Things are coming down to the wire for the battered California utility stock after the company indicated earlier this month it faces roughly $30 billion in wildfire liability and is preparing a bankruptcy filing.

Related Link: How PG&E's 2001 Bankruptcy Compares To Its Current Situation

Bankruptcy The Wrong Call?

Analysts are uncertain as to whether or not PG&E will or should go through with the bankruptcy filing, which could come as soon as Jan. 29. Even in the event of a bankruptcy, there could still be value left for current shareholders.

According to Citi analyst Praful Mehta, bankruptcy may no longer be the best option for PG&E. Citi was initially in favor of a bankruptcy filing assuming California legislators would take additional steps to fix “broken” inverse condemnation laws holding utility companies responsible for wildfire damages.

“On our call held last week, lawyers from H&K expressed skepticism that IC can be addressed through the Ch11 route,” Mehta wrote Thursday. “If IC cannot be addressed, Ch11 likely not the right call.”

Citi has a Neutral rating and $11 price target for PG&E stock.

Proxy Fight

In addition to the new analyst commentary, hedge fund and PG&E shareholder BlueMountain Capital Management said Thursday it's planning to launch a proxy fight against the PG&E board. BlueMountain said it wants to win enough votes at the company’s annual shareholder meeting in May to replace all 10 current board members.

“In order to rebuild essential relationships and restore trust, the company needs an entirely new board,” BlueMountain said in a letter.

BlueMountain has called a bankruptcy filing “unnecessary” and said a new board and better oversight could ultimately get the stock back at the $50 level.

BlueMountain’s chances of success seem extremely remote given that the fund owns only about 2 percent of the company and PG&E’s proposed bankruptcy filing date of January 29 is well before the shareholder meeting.