(Bloomberg) – Shares Hawaiian Electric Industries Inc. are recording the worst weekly decline in at least four decades amid concerns it may be responsible for the fires that have ravaged the island of Maui, with the Wells Fargo analyst warning that the potential liabilities could be large enough to wipe the value of its utility arm away.
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The stock is down 58% this week, the sharpest drop in data dating back to 1980. The selloff was driven by investor concerns that the company’s power equipment could have started the blaze, though no official cause has yet been determined.
The risk has prompted investors and Wall Street analysts to drastically reverse their outlook for the company, which also owns American Savings Bank FSB. Guggenheim analyst Shahriar Pourreza pulled his price target on the stock, saying the “shares are untouchable.” At Wells Fargo, Jonathan Reeder lowered his $25 estimate from $8 to $8, advising customers to assume that the utilities are now effectively worthless.
“We believe it is prudent to assume the utility is worth $0/sh as property damage, loss of life plus pain and suffering, and economic losses are likely to run well into the billions of dollars, far exceeding the stock value of the utility before the wildfire.” Reed told customers in a note.
Fallout from wildfires brought California utility PG&E Corp. bankrupt after its equipment was found to have started some of the fires, including one in 2018 that killed more than 80 people and destroyed the city of Paradise. Tolls in Maui have already surpassed that, making the U.S. fires the deadliest in more than a century.
Hawaiian Electric offset some of the decline on Friday, rising 14% after the company said it was seeking advice from experts in a filing. Hawaii Electric also said there is no precedent in Hawaii for applying the kind of legal principle that played a role in the California utility’s demise.
“The goal is not to restructure the company, but to continue to exist as a financially strong utility that Maui and this state needs,” the company said in the filing.
The company did not respond to a request for comment on analysts’ views.
The stock had fallen for eight consecutive days before Friday’s rally, and the value of the company’s banking unit may be a cap on how low the price could fall. For that reason, Wells Fargo’s Reed raised the stock to the equivalent of a hold rating, saying much of the risk was mitigated by this week’s sharp drop.
“The precise downside from here is less clear as we believe at least the bank has value,” Reeder wrote.
–With assistance from Carmen Reinicke.
(Updates stocks and chart to close the market.)
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