Hawaiian Electric's Phoenix Moment: A Major Bet Signals Confidence Post-Wildfire Settlement

In a bold signal of confidence, a major institutional investor has placed a high-conviction bet on the recovery of Hawaiian Electric Industries, Inc. (NYSE: HE), the primary utility serving Hawaii. The trade, a complex zero-cost options strategy, suggests that the darkest days following the devastating 2023-2024 wildfire crisis may finally be over for the embattled company.

As of late January, HE shares were trading around $15.87. The investor's position involves a "risk-reversal" strategy set to expire in January 2027, effectively creating a synthetic long stake in 2 million shares. The structure capitalizes on a persistent anomaly in HE's options market: while puts remain expensive due to lingering wildfire fears, calls are relatively cheap. This allows the investor to target gains above $15 per share while only accepting the obligation to buy shares at $10—a level close to the company's tangible book value.

The backdrop for this trade is a fundamentally improved outlook. The 2024 global settlement related to wildfire liabilities, coupled with Hawaii's Act 301 which allows for cost securitization, has materially reduced bankruptcy risk. The company's balance sheet has been shored up through an equity raise and renewed access to capital markets. Management has also assured that future funding needs will avoid highly dilutive equity sales, a move that previously crushed investor sentiment.

"This isn't just a speculative punt; it's a calculated bet on normalization," says Michael Chen, a utilities analyst at Horizon Capital Advisors. "The trade architecture signals that a sophisticated player sees the downside as largely capped and believes the market is undervaluing the path to restored earnings power."

With a mandated expansion of its rate base to fund wildfire safety investments, HE's book value is expected to grow, making the $10 strike price in the trade appear increasingly conservative. Analysts project that by 2027, earnings could exceed $1.00 per share. A return to a standard utility price-to-earnings multiple around 15x would imply a share price in the $16-$17 range, potentially making the bullish options position highly profitable.

Investor Reactions:

Sarah Jenkins, Portfolio Manager, "This is a classic 'smart money' signal. They're using market inefficiency—the inflated cost of disaster insurance—to finance a bet on the comeback. It tells me the institutional view is that the legal and financial overhang has been resolved enough to start looking forward."

David Rho, Independent Investor, "Are you kidding me? This is gambling on a company that nearly burned down an island and faced bankruptcy. One bad hurricane season or legal setback and this 'zero-cost' trade turns into a massive liability. This isn't investing; it's financial engineering over a still-smoldering crater."

Linda Garcia, Retired Teacher & HE Customer, "As someone who pays the bills and lived through the fear, I just want stability. If this means the company is on solid ground and can focus on preventing future disasters, that's what matters most. The stock price is a secondary concern to safety."

The trade echoes a broader theme in the utilities sector, where wildfire-related sell-offs have sometimes created dislocation between price and fundamental value. While HE did not rank among the 30 most popular hedge fund stocks in a recent survey, 28 funds held positions in Q2, indicating specialized interest remains.

Disclosure: None.