Investors are eyeing stocks with strong links to Maui as officials and residents of Lahaina and Hawaii's other islands wrestle with the countless challenges posed by the early August Maui wildfires. Meanwhile, Hawaiian Electric Industries faces a lawsuit for its alleged role in the blaze that consumed large portions of the island's coast.
Massive wildfires ripped through Maui's city of Lahaina after what started as a small Aug. 8 brushfire went out-of-control. First responders battled the blaze for two days as the blaze reduced sections of the Hawaiian island's coastline to essentially ash. At least 114 people had been confirmed dead as of early Monday. The death toll is expected to climb with more than 1,000 still reported missing, in a city of 12,000 residents.
"This is unprecedented," Mui Police Chief John Pelletier said in a Wednesday news conference, CNBC reported. "No one has ever seen this that is alive today. Not this size, not this number, not this volume — and we're not done."
Investigators are still trying to discover the cause of the Maui wildfires. Early evidence suggests a deadly mix of unfortunate conditions, firefighting strategy and utility carelessness.
Maui Wildfires: Possible Cause
Videos from residents reportedly show downed power lines igniting dry grass along a road near Lahaina. Meanwhile, firms that monitor grid sensors reported dozens of electrical disruptions in the hours before the fires began, including one that coincided with the video footage in question. Initial firefighting efforts reportedly, at first, suppressed the blaze. But strong winds from Hurricane Dora are thought to have revived and rapidly spread the flames, which gained momentum as dry brush and grass acted as kindling.
A lawsuit filed by San Antonio, Texas-based law firm Watts Guerra last week alleged Hawaiian Electric, which provides energy to 95% of the state, knew of potential risks and failed to update its electric grid to prevent the fires.
"Hawaiian Electric is not just responsible and they weren't just negligent," lead attorney Mikal Watts wrote, NBC News reported. "They were grossly negligent by making conscious decisions to delay grid modernization projects that would have prevented this very tragedy."
Hawaiian Electric Scrutiny
HE stock dove nearly 58% last week following Wall Street Journal reports that the company is discussing potential restructuring as it explores its legal and financial options following the Maui wildfires.
Hawaiian Electric declined to comment publicly on the lawsuit. In their latest SEC filing from Thursday, the company said it was in close coordination with community partners and working to support emergency response efforts to help customers and employees. The company suspended bills for 18,000 customers in the affected areas.
"The past days have been devastating for Maui and all of Hawaii. We have seen human loss and devastation on a scale that's difficult for our hearts and minds to process," Hawaiian Electric CEO Shelee Kimura said. "Facts about this event will continue to evolve. And while we may not have answers for some time, we are committed, working with many others, to find out what happened as we continue to urgently focus on Maui's restoration and rebuilding efforts.
Power was restored to roughly 80% of residents as of Aug. 17. About 1,900 customers in West Maui remained without electricity, not including the 2,600 homes and businesses that were destroyed, Hawaiian Electric reported.
However, Hawaiian Electric had concluded it needed to upgrade its power lines following the 2019 wildfire season, the WSJ reported. Still, the company only invested $245,000 in wildfire-specific projects on the island from 2019 to 2022. The company didn't seek approvals for rate increases to pay for such projects until 2022. It has yet to receive those requested increases.
HE Stock Cut
Wells Fargo slashed its price target on HE stock to $8 from $25 on Friday, noting that the prospects of Hawaiian Electric avoiding liability appears "highly unlikely." Wells Fargo upgraded the shares to equal weight from under weight.
S&P Global Ratings cut its rating on Hawaiian Electric's debt to BB-, which is "junk" or speculative-grade status on Tuesday.
Stocks React To Maui Wildfires
Host Hotels & Resorts has four hotels in the state, including three on Maui. Hawaii is Host Hotels' largest market, representing 11% of its earnings before interest, taxes, depreciation and amortization (EBITDA) in 2022. Maui alone made up more than 90% of that figure. HST stock was volatile last week, but propped by heavy buying on Friday as more than 9.6 million shares changed hands. Shares ending 1.1% lower for the week.
Other Hawaii-related stocks saw larger losses following the fires.
Hawaiian Holdings, which operates Hawaii Airlines, fell 5.4% last week. Following the Maui wildfires, the state of Hawaii "strongly discouraged" travel to the island.
Shipping firm Matson carved 6% lower. The shipping company reported that it was providing equipment and services to aid in relief efforts. It reported cargo operations at Maui's Kahului Harbor continued uninterrupted, and that its inter-island supply barges would continues scheduled service.
Real estate sales came under close scrutiny after the Maui wildfires. Hawaii's Gov. Josh Green announcing Wednesday efforts to launch a sales moratorium for fire damaged properties, as speculators reportedly attempted to lock in fire-sale deals following the disaster.
Stocks with possible links to Maui land holdings saw mixed action. Hawaiian banks, including Bank of Hawaii, Central Pacific Financial and First Hawaiian recorded losses between 3.5% and 4.5%. Maui Land and Pineapple surged more than 5% last week. Shares climbed another 3.9% Monday after slumping 2% in early trade.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison
