At the end of 2025, hedge fund manager David Einhorn shared a candid appraisal of a winning trade his fund had made on Pacific Gas & Electric (PCG) in the aftermath of the 2025 Los Angeles wildfires, which had caused an estimated $40 billion in insured losses and $140 billion in economic losses.
Speaking on a November Greenlight Capital Re earnings call as chairman of the reinsurer he founded, Einhorn explained why his hedge fund had opened a new position in PG&E
"While the company was not exposed to January's catastrophic L.A. wildfires, its earnings multiple collapsed to below 10x on concerns that the California Wildfire Fund, an important defense against wildfire-related damage claims that [it] shares with Edison International, will be depleted," he told investors. "We invested with a view that the legislature is likely to put in place funding support and make further wildfire risk reform a priority. We have since seen progress in these initiatives and expect PG&E to re-rate closer to the nearly 18x average peer multiple."
In July 2019, California Governor Gavin Newsom signed Assembly Bill 1054, which capped the state's investor-owned utilities' wildfire-liability exposure through a roughly $21 billion fund jointly capitalized by utilities and ratepayers, backstopping claims for participating utilities that maintain valid safety certification.
Whether the fund would continue performing that function became an open question after the January 2025 wildfires.
In response, California's legislature enacted Senate Bill 254 , commissioning a follow-up natural-catastrophe-resiliency study. The study's report, delivered to Governor Newsom and the Legislature in April by the California Earthquake Authority in its role as Wildfire Fund Administrator, recommended sweeping utility-liability reforms, including the elimination of California's inverse-condemnation doctrine for utility-caused wildfires, the legal mechanism that had driven PG&E to bankruptcy in 2019 and whose continued application Einhorn identified as the central overhang on PG&E's earnings multiple.
Based on 13F-implied quarter-end data, Greenlight's PG&E position has returned approximately 16.5% from its Q3 2025 initiation through the first quarter of 2026 — translating to an estimated $17 to $20 million in combined realized and unrealized gains on roughly $118 million invested.
And SEC filings show the position remains substantially open, with only a small Q1 2026 trim. Einhorn's stated thesis — a re-rating from below 10x to the 18x peer multiple — would imply meaningful further upside if it plays out fully.
PG&E shares closed at $16.82 on Thursday.
A review of SEC data shows that several other hedge funds made similar trades, betting that California's policy response to the electric utility industry's wildfire-induced financial fragility would coincide with skyrocketing in-state power demand driven by the AI data center boom.
Major US banks took the opposite side, betting that the wildfire-exposed insurance carriers had been over-discounted for 2025's catastrophe losses and would benefit from California Department of Insurance rate-adequacy reforms, also tied to AI growth, before the utility re-rating Einhorn anticipated could fully play out.
The split is the cleanest cross-sector signal of where institutional capital sees California-wildfire-exposed equity heading in risk markets.
