Hawaiian Electric Industries (NYSE: HE) stock is down another 24% premarket. HE stock has now lost well over 65% of value since the Maui wildfires. It’s even possible that HE was in fact responsible in some manner for those fires but the vision that investors have in their minds is that of Pacific Gas and Electric. Which was driven bankrupt by claims about cables causing wildfires - at the same time as it wasn’t allowed to raise the money to put the cables underground. Damned if you do and if you don’t.
A reasonable observation is that Hawaiian Electric is going to get eaten by the lawyers: “Hawaiian Electric’s stock tumbled to a 13-year low Monday morning, plummeting nearly 40% after a class action lawsuit filed over the weekend alleged that Maui’s devastating wildfires were caused by the utility’s energized power lines that were knocked down by strong winds.” Now, whether it should or it shouldn’t really isn’t the point here.
Hawaiian Electric Industries stock price from Google Finance
Today’s drop is that the logical next step of such a process seems to have started. HE is already talking to restructuring experts about how to deal with this potential liability.
“Hawaiian Electric Industries is speaking with restructuring advisory firms to address financial and legal challenges over its potential liabilities in the wake of the Maui wildfires, the Wall Street Journal reported on Wednesday. The utility firm is in discussions over the strategies it can pursue and to determine whether it needs to hire legal and financial advisers, the report said, citing people familiar with the matter.”
And the thing is we know how this works out. The equity gets shafted. The lawyers get rich, some consumers gain some recompense, the debt gets parked and, as we say, the equity gets the shaft. Which is exactly what did happen at PG&E. What had been a nice boring and dividend paying utility became a broken shell in bankruptcy.
We think there could well be interesting price movements in Hawaiian Electric as opinions change about how this will play out. But we’d suggest that a likely outcome will be that the equity will go to zero. This is therefore a position to play and trade and most certainly is not, given the risk, a position to be invested in for the long term.