PG&E Shares Tumble in Wake of Its $5 Billion Equity Offering
PG&E Is Said to Raise $5.5 Billion Selling Shares, Equity Units
(Bloomberg) -- PG&E Corp. shares tumbled after the company raised more than $5 billion in a common stock and equity unit offering to help finance its exit from the biggest utility bankruptcy in U.S. history.
The California power giant’s shares fell as much as 5.8% Friday, to $9.17, following its sale of more than 420 million shares at $9.50 each. The shares were trading at $9.34 at 12:18 p.m. in New York.
PG&E’s offering is one the year’s largest stock sales and part of the company’s plan to raise $9 billion in equity to help pay for claims from wildfires through its Chapter 11 case. The company has also raised more than $13 billion in the debt markets to finance its bankruptcy, which began after its equipment sparked deadly blazes in Northern California.
The company said it expects to emerge from Chapter 11 on or about July 1.
The broader market also fell Friday, with U.S. stocks dropping to a two-week low as a resurgence in new virus infections drag on the American economy. That creates a challenge for PG&E as it brings a large number of new shares onto the market.
“Obviously, it’s a substantial amount of dilution,” said Kit Konolige, an analyst for Bloomberg Intelligence. “Maybe people would have liked to have seen a higher price.”
PG&E’s $9.50 per-share offer price represented a 2.4% discount to Thursday’s close of $9.73. The share sale, as well as separate offering of equity units, which have a coupon of 5.50%, netted the company about $5.15 billion, according to a statement early Friday.
What Bloomberg Intelligence Says
“With successful equity offerings of more than $9 billion opening the way to a bankruptcy exit by July 1, PG&E faces one key issue -- surviving the summer wildfire season.”
- Kit Konolige, senior utilities analyst
Read the full report here.
Goldman Sachs Group Inc. and JPMorgan Chase & Co. are underwriting the offering. Barclays Plc, Citigroup Inc. and BofA Securities Inc. are joint book-running managers.
PG&E filed for Chapter 11 last year facing $30 billion in liabilities from the fires, some of the worst in California history. They included the Camp Fire, which destroyed the town of Paradise and killed more than 80 people. The company pleaded guilty last week to 84 counts of involuntary manslaughter. State regulators fined PG&E $1.9 billion in connection with the blazes.
PG&E is raising money to help cover $25.5 billion in damage claims it resolved in its bankruptcy through settlements with fire victims, insurers and local government agencies.
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