By Karen Langley
Shares of PG&E Corp. plummeted Thursday after a judge cleared the way for a rival bankruptcy plan that could nearly wipe out the troubled utility's shareholders.
The stock dropped 28% to $7.85, on pace for its biggest decline since Jan. 14 when it fell 52%. Shares are down nearly 90% from their closing high of $71.56 in September 2017.
The judge overseeing PG&E's bankruptcy case stripped management of its exclusive right to file a plan to restructure the company. The decision opens the door for bondholders -- who are allied with victims of wildfires that drove PG&E to bankruptcy -- to put forth a plan that would leave shareholders with a smaller stake in PG&E than envisioned in the plan previously proposed by management.
"PG&E's goal of a tough negotiation stance with the [fire victims] backfired," Praful Mehta, lead analyst for utilities and renewables at Citigroup, wrote in a note Thursday.
He changed his price target on the stock to $5, reflecting what he estimates is a 75% chance that the bondholder bankruptcy plan is selected and existing shares become worthless, versus a 25% chance that the PG&E plan wins out and shares are worth $20.
"The ruling means more voices and more of a governance debate upcoming," UBS analysts wrote in a note.
In another bad publicity move, the company cut power Wednesday to about 700,000 households and businesses in northern and central California. The blackout is meant to avoid the type of deadly fires that killed dozens last year and forced the utility into bankruptcy court.
PG&E filed for chapter 11 in January to manage the potential legal costs of a series of deadly wildfires caused by its equipment in 2017 and 2018.
The company declined to comment on its stock price but told The Wall Street Journal Wednesday that it was disappointed by the judge's decision to open the door to rival restructuring plans.
PG&E's bonds were also active. Its 6.05% bonds due in 2034 got a particularly large boost, rising to roughly 115 cents on the dollar from around 109 cents before the judge's decision, according to MarketAxess. With their relatively high coupon and distant maturity, the 6.05% bonds have the most to gain from a plan that is more favorable to bondholders, analysts said.
--Sam Goldfarb contributed to this article.