Shares of Electricity company in Hawaii ( HE -1.04% ) There was a decline of 12.8% recorded by Thursday of this week, as indicated by the data. S&P Global Market Intelligence is a leading provider of financial information and data. .
Hawaiian Electric is still recovering from the consequences of the catastrophic wildfires in August 2023, which resulted in the loss of 100 lives and approximately $5.5 billion in damages, as reported by the U.S. Fire Administration.
After experiencing a significant drop previously, the recent decline in the stock was triggered by the inclusion of “going concern” wording in the company’s quarterly report submitted towards the end of last Friday. This led to a sell-off of the stock on Monday of the current week.
Requiring an additional $2 billion.
It is typically a negative indicator when a company submits a significant disclosure on a Friday. Recently, Hawaiian Electric submitted its 10-Q for the second quarter, which included wording indicating concerns about its continuity. bankruptcy It is a potential outcome.
In the beginning of this month, Hawaiian Electric and other involved parties came to a resolution with the plaintiffs on all legal claims related to the wildfire, totaling $4 billion. Hawaiian Electric is responsible for $1.99 billion of the settlement costs.
Hawaiian Electric is facing a challenge as it currently has only $550 million in cash reserves as of June 30. Additionally, the company is investing heavily in capital expenditures for future wildfire prevention efforts. Despite these financial constraints, Hawaiian Electric has announced that it does not intend to increase utility rates to cover the costs associated with claims.
Therefore, the utility company needs to secure additional funds. According to a recent press statement, the company mentioned that the funds would be obtained through a combination of debt, ordinary shares, equity-linked securities, or other available alternatives.
Nevertheless, obtaining funding is still uncertain. The company also issued a cautionary statement in its quarterly report released last Friday.
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Specialized knowledge is required by Hawaiian Electric.
Due to its essential and heavily regulated operations, there is a good chance that Hawaiian Electric could avoid bankruptcy by securing financing. In the event of bankruptcy, there is a possibility that shareholders could still hold some worth, as the company retains about $1.2 billion in assets, despite the additional liability on its financial records. book value .
However, the assertions could lead to a situation where the company may need to secure additional funds through debt or by issuing more shares. It should also be noted that the agreement is still in the preliminary stages and has not been formally completed.
If there are no more unexpected events, it is conceivable that the stock might be reaching its lowest point now. Nonetheless, individuals seeking a A valuable investment prospect with significant potential. It is advisable to consider investing in Hawaiian only if one has expertise in evaluating troubled companies. Otherwise, the level of risk is too great.
