PCG thesis
Updated
This is not investment advice just the ramblings of an insane trader.
I call this a thesis because its been 3 years in the making.
Anyway, when it dipped below 4 the second time I became very interested because "utility monopoly", cant go tits up unless broken up by super gavin. So I bought in the red circle. Then sold in the green circle, the blue X is where I fucked up by not holding half my shares and playing with house money. But profit is profit and I'm happy until tomorrow. What happens tomorrow? Friday June 19th? Not only is it Juneteenth it is the day that PCG will likely finally emerge from a 3 year saga of almost bleeding to death in bankruptcy. Why is this important? Well there are a lot of factors at play here:
1. Victims of the fire that caused the bankruptcy:
This class is interesting not only did PCG trick them into partially taking stock as compensation for their damages/loved ones deaths the $13.5 billion fund plus stock only goes to victims who didn't already have an insurance claim that was fulfilled. The victims had a sub clause that in order for the stock to be a viable payout PCG had to plead guilty... I mean this is a total shit show.
2. Monopoly status of PCG:
PCG is a monopoly no way its not and california was not cool with that; Dear gavin was looking to break it up because of public outrage over what happened, then coronavirus happened and that poor man well he got to wipe the sweat off his brow and take a breather. Not only did he not have to care about PCG anymore he had a greater threat that would distract from the ineptitude present in their inability to do anything about PCGs size. Now this monopoly status and the combination of providing a service that literally everyone needs means that PCG rakes in tons of cash like fucking truck loads. Despite having some really bad quarters of the past 3 years because of wildfire payouts they still have managed to not only stay in business but hold onto a decent cash reserve that will allow them to coast out of bankruptcy with a smaller debt pile than expected.
3. Pensions:
California has great pension plans for state and county workers, one of the best features of those pension plans is having PCG stock in them both common stock and preferred stock none of which have been printing dividends for 3 years. This is where the sweat in Gavin's brow comes into play not only did he dodge the monopoly bullet he dodged the retirement float debt bullet. PCG will most likely reinstate their dividend on the preferred stock before the year is out and it will probably come back on the common stock soon there after in 2021. This means that the pensions will have better float than the past three years. And the pensions will likely be buying this stock in gurney to make sure they don't miss the boat on the increase and potential to leverage the positions.
4. Dividends:
PCG dividends were only cut because the bankruptcy judge wanted them to be used instead to payout victims, once they leave bankruptcy the wildfire account is established and populated with cash and stock handouts. They will be looking to reissue dividends to the public again to gain a more favorable valuation.
5. Employees:
In response to the bankruptcy/wildfire demands PCG had to ramp up hirings so they could go out and identify poles and equipment that was theirs and so they could trim trees across the state. That's right PCG didn't even know what poles and equipment they owned across the pacific northwest, its beyond irresponsible but who cares necessity monopoly. These employees will likely be removed from the on going operations of the company once they emerge from bankruptcy since they will no longer be held to excessively stringent standard practices. They are coming into a situation where utilities are being held to more safety guidelines but SCE was not being held to the same standard PCG was while in bankruptcy so expect them to get a little more lax and have some layoffs in the near future to increase profits a little bit.
Lastly not only does this create a favorable position and potential growth situation for the stock lets not forget that the fed is printing free money right now. Any debt that PCG takes on will have minimal impact on its operating business and Hedge funds and other institutional holders will be looking to capitalize on this forward looking idea. I personally feel like rockets will result from this but I cant be sure. Is this going to be shopify? Fuck no, but at 10.80 a share this shit is way way way under valued.
We are talking about a multi state power monopoly that issues an essential service to people and gets paid for that service regardless of whether or not the actual homeowner can afford it. The only real reason why the price is depressed is because of the potential and literal gavin threat of it being broken up into multiple pieces and sold off. But now that the bankruptcy is going to end the antitrust situation will be harder to pursue, and corona virus made people all but forget this whole situation.
That's my two cents take it or leave it.
I call this a thesis because its been 3 years in the making.
Anyway, when it dipped below 4 the second time I became very interested because "utility monopoly", cant go tits up unless broken up by super gavin. So I bought in the red circle. Then sold in the green circle, the blue X is where I fucked up by not holding half my shares and playing with house money. But profit is profit and I'm happy until tomorrow. What happens tomorrow? Friday June 19th? Not only is it Juneteenth it is the day that PCG will likely finally emerge from a 3 year saga of almost bleeding to death in bankruptcy. Why is this important? Well there are a lot of factors at play here:
1. Victims of the fire that caused the bankruptcy:
This class is interesting not only did PCG trick them into partially taking stock as compensation for their damages/loved ones deaths the $13.5 billion fund plus stock only goes to victims who didn't already have an insurance claim that was fulfilled. The victims had a sub clause that in order for the stock to be a viable payout PCG had to plead guilty... I mean this is a total shit show.
2. Monopoly status of PCG:
PCG is a monopoly no way its not and california was not cool with that; Dear gavin was looking to break it up because of public outrage over what happened, then coronavirus happened and that poor man well he got to wipe the sweat off his brow and take a breather. Not only did he not have to care about PCG anymore he had a greater threat that would distract from the ineptitude present in their inability to do anything about PCGs size. Now this monopoly status and the combination of providing a service that literally everyone needs means that PCG rakes in tons of cash like fucking truck loads. Despite having some really bad quarters of the past 3 years because of wildfire payouts they still have managed to not only stay in business but hold onto a decent cash reserve that will allow them to coast out of bankruptcy with a smaller debt pile than expected.
3. Pensions:
California has great pension plans for state and county workers, one of the best features of those pension plans is having PCG stock in them both common stock and preferred stock none of which have been printing dividends for 3 years. This is where the sweat in Gavin's brow comes into play not only did he dodge the monopoly bullet he dodged the retirement float debt bullet. PCG will most likely reinstate their dividend on the preferred stock before the year is out and it will probably come back on the common stock soon there after in 2021. This means that the pensions will have better float than the past three years. And the pensions will likely be buying this stock in gurney to make sure they don't miss the boat on the increase and potential to leverage the positions.
4. Dividends:
PCG dividends were only cut because the bankruptcy judge wanted them to be used instead to payout victims, once they leave bankruptcy the wildfire account is established and populated with cash and stock handouts. They will be looking to reissue dividends to the public again to gain a more favorable valuation.
5. Employees:
In response to the bankruptcy/wildfire demands PCG had to ramp up hirings so they could go out and identify poles and equipment that was theirs and so they could trim trees across the state. That's right PCG didn't even know what poles and equipment they owned across the pacific northwest, its beyond irresponsible but who cares necessity monopoly. These employees will likely be removed from the on going operations of the company once they emerge from bankruptcy since they will no longer be held to excessively stringent standard practices. They are coming into a situation where utilities are being held to more safety guidelines but SCE was not being held to the same standard PCG was while in bankruptcy so expect them to get a little more lax and have some layoffs in the near future to increase profits a little bit.
Lastly not only does this create a favorable position and potential growth situation for the stock lets not forget that the fed is printing free money right now. Any debt that PCG takes on will have minimal impact on its operating business and Hedge funds and other institutional holders will be looking to capitalize on this forward looking idea. I personally feel like rockets will result from this but I cant be sure. Is this going to be shopify? Fuck no, but at 10.80 a share this shit is way way way under valued.
We are talking about a multi state power monopoly that issues an essential service to people and gets paid for that service regardless of whether or not the actual homeowner can afford it. The only real reason why the price is depressed is because of the potential and literal gavin threat of it being broken up into multiple pieces and sold off. But now that the bankruptcy is going to end the antitrust situation will be harder to pursue, and corona virus made people all but forget this whole situation.
That's my two cents take it or leave it.
Note
There is an additional issue that I forgot to add when I wrote this, the shares that are being given to the victims as part of the 13.5bln fund are in a lockup for 90 days from the bankruptcy exit. So there is a run up period into october that will likely play out.
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