PG&E Stock Price On A Roller-Coaster Ride On Overhaul Plan

Shares of PG&E are trading nearly 5% lower today despite the fact that the stock price gained almost 15% yesterday on the proposal to restructure the embattled natural gas and electricity company. 

Fundamental analysis: Stock surges on overhaul plan

In a filing submitted to California Public Utilities Commission and the U.S. Bankruptcy Court, the PG&E Corp. has offered to overhaul its board with safety experts as it attempts to regain trust of the California state and court. 

“Under our plan, the company will emerge from Chapter 11 as a reimagined utility with an enhanced safety structure, improved operations, and a board and management team focused on providing the safe, reliable and clean energy our customers expect and deserve,” PG&E Chief Executive Bill Johnson said.

Last year, the embattled company filed for Chapter 11 – a form of bankruptcy that involves a reorganization of a debtor’s business affairs, debts, and assets – protection after it faced $30 billion or more in liabilities, mainly from fires in 2017 and 2018.

“We are committed to emerge from Chapter 11 by June 30, 2020, in a manner that allows us to help lead California toward the future, meeting the highest safety, governance, and operational standards,” added Johnson.

The PG&E Corp. has till 30 of June to exit bankruptcy, but it needs approval from Gov. Gavin Newsom, who insists on a bigger reorganization plan with an option for the state to take over the company. The exit from bankruptcy will enable PG&E to qualify for a state program offering assistance with future fire claims.

“PG&E continues to struggle to satisfy Gov. Gavin Newsom’s demand that the utility commit to wide-ranging changes. Ultimately, PG&E likely must offer Newsom an olive branch,” Sandhill Strategy analyst Katie Bays said.

Technical analysis: Up and down

The PG&E stock price initially gapped 8% higher on the overhaul plan with additional gains totalling a rise of 15% yesterday. However, the stock price is trading nearly 5% lower as investors don’t seem convinced that the proposed changes have enough in lockers to convince Governor Newsom. 

Technically, the price action tests an important resistance around the $17 mark. Investors who are looking to buy PG&E stock will aim to target the major resistance at $25. On the downside, the bulls are supported by the area of $3.50 – $6.50.

The PG&E stock price lost nearly 70% in value last year on fears that the company will face $30 billion or more in liabilities from wildfires. 

Summary

Shares of PG&E have moved up and down in the last two days on the proposed plan to restructure the embattled company. However, investors don’t seem too convinced by the proposal as the company has until June 30 to exit from bankruptcy.