alt Hacker NewsExcept that the state of California ended up on the hook for the first bankruptcy. The shareholders were the only ones who came out fine. The customers and the state got stuck with the bill.
Exactly what risk did they take on? A few missed dividends, and two years for the stock price to recover?
As for the second bankruptcy, the main result of that was that their customers ended up paying the bill for other customers whose houses were destroyed. But you are partially correct, the shareholders did take a haircut of a few percentage points from stock dilution. I wouldn't be too upset for them, the stock's now double what it was before the bankruptcy.[1]
California's cities wanted them to take a haircut of 100 percentage points, but that clearly didn't happen.
[1] For some reason, the wise stewardship of the shareholders and the board did nothing to mitigate the crisis that caused the company to get sued for 50 billion dollars. They were too busy squeezing dividends out of it to worry about liabilities. [2]
[2] And why should they? They aren't personally liable.
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> As for the second bankruptcy, the main result of that was that their customers ended up paying the bill for other customers whose houses were destroyed.
There's half of the major problems. If I walked around covered in gasoline every day and eventually walked past someone smoking, not a lot of people would blame the smoker for me getting engulfed in flames.
Yet build a wood house in a forest maintained for thousands of years by American Indians with fire, require universal electricity supply, and suddenly it's not the homeowner's fault at all. Everyone else should bail them out over and over again.
Just had to look this one up. PG&E's first bankruptcy was April 6, 2001. Based on the stock price decline prior to that, it looks like their shareholders thought everything was ok in November of 2000 and the stock was $27 (it bottomed out at $8.97 in April of 2001.) As of today, the stock is worth $15.97.
If we go back 30 years to 1995 -- and you invested $10,000 in PG&E and $10,000 in the S&P500, and reinvested the dividends -- today the PG&E investment would be worth $11,708. The S&P investment would be worth $201,420.
To put it in simpler terms, the PG&E investors look like gullible fools.