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Morgan Stanley: 6 Questions For PG&E After Utility's Bankruptcy Filing

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Morgan Stanley: 6 Questions For PG&E After Utility's Bankruptcy Filing

With PG&E Corporation (NYSE: 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.

Related Links:

PG&E Officially Files For Bankruptcy

Wall Street Reacts To The Latest PG&E Liability Ruling

Latest Ratings for PCG

DateFirmActionFromTo
Aug 2020MizuhoMaintainsBuy
Jul 2020Morgan StanleyMaintainsEqual-Weight
Jun 2020Morgan StanleyMaintainsEqual-Weight

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View the Latest Analyst Ratings

 

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