I own few shares of PG&E and recently got an intimation from my broker regarding the chapter 11 bankruptcy filing by PG&E.
However, I also see the stock price going up for some reason.
I thought with bankruptcy, any company is not in good financial health and is likely to go under. Can someone explain this phenomenon?
Should I hold the shares or try to sell them? Thanks.
There are 3 types of bankruptcy filing choices in the US.
Sole proprietorships are legal extensions of the owner. The owner is responsible for all assets and liabilities of the firm. A sole proprietorship can take bankruptcy by filing for Chapter 7, 11 or 13.
Corporations and partnerships are legal entities separate from their owners and they can file for bankruptcy protection under Chapter 7 or Chapter 11.
Chapter 13 is generally reserved for consumers though it can be used for sole proprietorships. You file a repayment plan with the bankruptcy court detailing how you are going to repay your debts.
Chapter 11 bankruptcy protection means that a company near bankruptcy believes that it can recover, given the opportunity to reorganize.
For companies where there is no hope of recovery, Chapter 7 protection involve the cessation of business operations and that results in the total liquidation of assets. A trustee is appointed by the bankruptcy court to take possession of the assets of the business and distribute them among the creditors.
Here is a link to an informative story about PG&E and Citibank's recent recommendation of PG&E shares. It is one man's opinion (the author) and is not a suggestion on my part that you buy, hold or sell shares of PG&E:
