(Bloomberg) — Xcel Energy Inc. fell the most in almost four years after it disclosed that a law firm representing property owners affected by the worst-ever Texas wildfire said the utility owner may be responsible for damages.

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The unnamed firm asked the company to preserve as evidence a fallen utility pole located near the fire’s potential area of origin, Xcel said in a regulatory filing. The company’s shares fell as much as 8.9%, the most since March 2020 — a plunge that reflects concern about potentially “catastrophic” wildfire liabilities, Bloomberg Intelligence analyst Nikki Hsu said in a note to clients.

“We will cooperate with officials while conducting our own investigations to determine the causes of the fires,” an Xcel spokesperson said in an emailed statement.

Xcel already faces lawsuits that accuse the company’s utility of sparking the most destructive fire in Colorado history, which state officials concluded was caused in part by a power line that snapped during high winds. Xcel disputes that its equipment caused the ignition. The December 2021 blaze, known as the Marshall Fire, destroyed or damaged more than 1,000 structures and caused an estimated $2 billion in property losses.

The Smokehouse Creek Fire is the largest-ever Texas wildfire, having charred more than 1 million acres along the state’s panhandle. At least one person died due to the blaze — an octogenarian who was trapped in her home, according to multiple media reports. Tens of thousands of cattle already may have perished and entire ranches have been wiped out, said Texas Agriculture Commissioner Sid Miller.

Read More: Worst Texas Wildfire in History Imperils Thousands of Cattle

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“Anytime you talk about utilities, wildfires and potential litigation, the initial reaction is going to be one of fear,” said Paul Patterson, a utility analyst for Glenrock Associates LLC. “Investors are potentially skittish about wildfires.”

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Thursday’s stock drop, which erased about $1.9 billion of Xcel’s market cap, is “an overreaction, albeit understandable given the overall anxiety around wildfire-specific risk among investors,” Sophie Karp, a utility analyst for KeyBanc Capital Markets, said in a note to clients.

Karp, who has an “overweight” rating on the stock, added that no determination of the wildfire cause has been made, it is burning in a sparsely populated area and Xcel has about $500 million in insurance.

Still, investors piled in to the Xcel options market for protection, pushing volume to almost 16,000 contracts — more than 30 times average — nearly all of them puts betting that the stock has further to fall. Puts expiring in September were the most actively traded, allowing the holders to sell more than 400,000 shares at $45. The cost of puts increased almost five times as much as calls, signaling the demand for cover against a slide in prices.

–With assistance from Carly Wanna and David Marino.

(Story updates with analyst comment and background in fifth through ninth paragraph)

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