(Business Insider) Iconic hedge-fund billionaire Seth Klarman could have taken a huge hit on an investment in PG&E — California's biggest utility provider — after the deadliest and most destructive wildfire in California history.
Soon after the wildfire broke out on November 8, the utility said it was having trouble with its transmission lines, and that it may be responsible. Since then, PG&E shares have plunged as much as 67%.
The stock recovered a bit after California Public Utilities Commission President Michael Picker told media in mid-November that he couldn't imagine letting the California utility declare bankruptcy even as it faces huge liabilities.
But PG&E has been under pressure again in the new year. Late Friday, a report said PG&E was considering filing for bankruptcy protection.And on Tuesday, S&P Global Ratings slashed PG&E's credit rating to junk, saying "negative public sentiment and the increased political pressure will challenge the regulators' willingness and ability to implement measures to protect credit quality over the near term." Shares have tanked nearly 30% this week.
Klarman's Baupost could be paying the price. Baupost loaded up 14,479,790 shares on PG&E in the third quarter, becoming the utility's sixth-largest shareholder with 18,979,790 shares, according to Bloomberg data.
The 14.5 million shares were trading at around $45 apiece in the third quarter, and only worth $17.50 as of Tuesday. It's unclear if Baupost sold any PG&E shares in the fourth quarter or so far this year. If the firm held its entire position through Tuesday, it could have lost $400 million over the past few months — not including the shares it owned before the third quarter.
On Monday, Baupost declined to comment on its investments.
Baupost is not the only investment firm that recently increased its stake in the California utility. BlueMountain Capital Management, which manages $21 billion, told investors in a recent letter obtained by Business Insider it has doubled down on its investment into the utility as it believes the market has overreacted to the impact of the deadly Camp Fire.
