Shares of PG&E, the parent company of Pacific Gas & Electric, attracted a slew of hedge fund investors in the third quarter — at precisely the wrong time.
Shares of the embattled utility company plummeted more than 63 percent in six trading sessions — including 31 percent on Thursday alone — as investors have raised serious concerns about its possible future costs and legal liabilities stemming from one or more of the deadly California wildfires.
On Friday, the stock rebounded by nearly 38 percent. It still remains down nearly 50 percent from its November 7 high, however. At the least, this is not the kind of volatility investors anticipate when they invest in a major utility company.
As Institutional Investor earlier reported, investors are concerned about the utility’s legal liabilities stemming from what are being called the Camp fires. A PG&E transmission line in the area of the Camp fire went offline 15 minutes before it was initially reported, according to a Los Angeles Times report. In addition, the company has reported finding a damaged transmission tower near where the fire reportedly began, according to the report.
Investors are undoubtedly concerned about the stock’s recent volatility. There is no way of knowing whether any of them sold shares in the past week or the days leading up to the fires.
It is clear from the recent regulatory filings, however, that in the third quarter at least three prominent hedge fund firms established big new positions in the stock.
Jonathan Auerbach’s Hound Partners, for example, bought more than 6.67 million shares, making it the Tiger Seed’s fifth-biggest U.S. long. Hound is also now the utility’s eleventh-biggest shareholder.
O. Andreas Halvorsen’s Viking Global Investors took a new stake of more than 5.7 million shares in the third quarter, and Chris Hohn’s TCI Fund Management bought a new position of 1.4 million shares.
Meanwhile, several prominent hedge funds sharply boosted already existing stakes in the company.
For example, Seth Klarman’s Baupost Group bought nearly 14.5 million shares of PG&E in the third quarter, boosting its stake to nearly 19 million shares. The stock is now the eclectic hedge fund’s fifth-biggest U.S. long. Meanwhile, Baupost is the utility’s fifth-biggest shareholder.
BlueMountain Capital Management bought more than 4.1 million shares and now owns 4.3 million shares. The stock is also the firm’s third-biggest U.S. long position. David Tepper’s Appaloosa Management bought nearly 2.2 million shares, boosting its stake to nearly 4 million shares.
There was at least one major seller in the third quarter, however. D.E. Shaw unloaded about 3 million shares, or roughly 30 percent of its total, leaving it with more than 6.7 million shares. It is still the tenth-biggest shareholder, slipping from the eighth spot in the previous quarter.
