Some people say that what happens in the after-hours trading session isn’t as important as what happens during regular hours, but in the case of PG&E Corporation (NYSE:PCG), there is bound to have some sort of ripple effect after the company plunged as much as 10% after-hours.
What happened? The decline started after the San Francisco-based company made it known to investors that it plans to stop sending out dividends. Why would they do that? Well, PG&E reportedly believes that there is a chance that it could be held responsible for the Wine Country wildfires that occurred in October of this year, which killed a total of 44 people.
While it is unfortunate that the stock is falling in today’s extended trading session, whoever is liable for the wildfires should be held responsible considering it caused over $9 billion in damages – even if that means upsetting investors in the process. Since the wildfires took place, a handful of people have sued the company, even though the Department of Forestry and Fire Protection has yet to figure out a cause.
Yet another reason for the after-hours crash was because PG&E’s utility subsidiary, Pacific Gas and Electric Company, also disclosed that it will stop the dividend on its preferred stock. Why? Exactly for the same reasons PG&E decided to suspend the quarterly cash dividend on the common stock.
For those who don’t know, PG&E is the main source of electricity and natural gas to the majority of the northern two-thirds of the state of California.
Based on how the stock market reacted, it seems investors and shareholders do not agree with the company’s decision. However, Richard C. Kelly, PG&E Chair of the Board, emphasized that the reason for doing this is because it will help with cash conversation and when thinking about the future, it is in the best interest of not only the company but also its shareholders and customers.
Nasdaq has given PG&E Corp an RSI reading of 29.7. Essentially this means that investors could look at this reading and come to the conclusion that the latest heavy selling is on the verge of wearing itself out.
Deciding to stop issuing dividends is a pretty big move, so I can only hope that it is the right decision, especially as we move into the new year. It’s one thing to announce something and have it flop, but to announce something only a couple weeks before we enter a new year is another. What if it was the wrong choice and all of 2018 gets affected by it? Check back in January to see if this is on the verge of happening.
Featured Image: twitter
