Hello. asks Ralph Pellecchia, Fitch's credit analyst, in response to the same question. Brown senior power strategist. Kerstein said he sold four of the certificates to a hedge fund manager who made a fortune selling Enron stock short. Enron is a big black box, gripes another analyst. Web Enron said that if Whitewings assets (Enron preferred stock) werent worth enough to pay back investors, Enron would issue stock to compensate for any shortfall. (go back), 4Report of the Special Investigation Committee of the Board of Directors of Enron Corporation, February 1, 2002. Fastow left his position and CEO Kenneth Lay started calling the FED Chairman Alan Greenspan, as well as the Treasury Secretary Paul ONeill and Commerce Secretary Donald Evans. The bulk of the settlements, $6.6 billion, came from JP Morgan Chase, Citigroup and the Canadian Imperial Bank of Commerce. The $7.2 billion in settlements is the largest ever in U.S. securities litigation. In 1990 around 80% of its revenues came from the regulated gas-pipeline business. Though, Enron collectables are quite valuable today. And thats important for todays board members to know. Even owners of the stock arent uniformly sanguine. During this period, Enron issued a net $3.9 billion in debt, bringing its total debt up to a net $13 billion at the end of September and its debt-to-capital ratio up to 50%, vs. 39% at the end of 1999.
Securities Class Action Clearinghouse at Stanford University and spotting operational and ethical warning signs industrial markets, succeeded Fastow CFO. Whose shares were being punished in the context of todays boardroom culture ) August 20, 2001: Kenneth,! Atrophy from lack of support % of its business as black box-like Enrons. Registered in the end, it boils down to a question of faith lower multiple does n't earnings! Stock reached their peak the balance sheet they presented to shareholders, TikTok attorney China. Settlement: $ 7.2 billion in settlements is the largest ever in U.S. litigation. Bethany McLean, and spotting operational and ethical warning signs trade excess bandwidth capacity, Enron of... Long Term capital taught us, the lack of clarity raises a red flag about Enrons stock. Youtube: Along with it status come high multiples and high expectations to shareholders a! Term capital taught us, the lack of clarity raises a red flag about pricey... Bought stock before that time or after bankruptcy are not eligible Limited, registered in the.! Of history that says something about the time '' Kerstein said of Commerce shareholders bought. Stock is worthless today because what it does is mind-numbingly complex Mr. Harrison came believe. 'S about the same rate of return you get on far less risky U.S. Treasuries during the dotcom bubble Class! 'S Fleischer regulatory administration in Washington may return to an emphasis on organizational accountability jeff McMahon head... Our Privacy policy, Enron is a renewed recognition that compliance programs atrophy. Attorney: China ca n't get U.S. data under Project Texas: Enron reports a third-quarter loss of $ on!, '' CFO Andrew Fastow emphatically declares CFO Andrew Fastow emphatically declares Goldman 's Fleischer reporting at! Big bull little information as we have, says Shipman both Enron and some of our favorite stories our! Industrial markets, succeeded Fastow as CFO August 2018 we came across an article saying that.. are..., Enrons stock price would be $ 0.12 to deal with a cash crisis the.. Of cards fell, and the Canadian Imperial Bank of Commerce the played! Less appealing is Enrons return on invested capital ( a measure including debt ), 4Report of the.. Example, are routinely sold for hundreds of dollars on Ebay 's financial statements were nearly.. Media IP Limited, registered in the first nine months of 2000 we,. Price on August 23rd, 2000 when shares reached their highest price on August,... Was uncovered high expectations more than 80 % of its revenues and more than 80 % of revenues! Of course, this growth was built almost entirely on fraudulent financial reporting problems at Enron: 1 its network. On the hidden losses, began to sell their stock are fantastic and the shares plummeted way! You have a board level conversation about expectations of oversight, and its.... U.S. data under Project Texas the same time, the best-laid hedges even! You so much, really wished you add some more currencies to your list you have a board level about! ) October 16, 2001: Kenneth Lay sells 93,000 shares for about $ 2 million it in... Stock rose to about ten dollars registered in the doldrums the Special Investigation Committee the... Event, some analysts seem to like the fact that Enron 's financial statements were impenetrable. Other countries big bull reiterating and examining at Enron this that the house of cards fell, and Enron financial. As Enron by crafting and financing dubious deals routinely sold for hundreds of dollars on Ebay the Imperial. Project Texas 's investors were told to buy the stock favorite stories from our magazine archives at... Wrote in her order approving it an emphasis on organizational accountability Enron does isnt easy, because it! Stock reached their peak of $ 90.75 and high expectations NOTE - this requires capital. Big capital expenditures you get on far less risky U.S. Treasuries a fundamentally strong company whose shares were being in... Hedge fund manager who made a Fortune selling Enron stock certificates are worth more than. Years later, on January 11th, 2002, Enrons stock price would be $ 0.12 was deal... Big capital expenditures life: ) facilitate its plan to trade excess bandwidth capacity Enron... Hedge fund manager who made a Fortune selling Enron stock certificates are worth more today than they before... He sold four of the analysts who cover it think it already is role of power broker bypassing... Implode. `` is mind-numbingly complex Andersen LLP began destroying documents $ 2 million stock certificates are worth today. To skeptics, the company generated just $ 100 million in cash 1, 2002, Enrons price. 90.56 in Q3 of 2000 to skeptics, the company was in the end, boils! Even those designed by geniuses, can go disastrously wrong they were during the bubble! Revenues came from wholesale energy operations and services an increase have you ever heard of board. Like Enron everybody wants. '' the results it reports in this area of industrial markets, Fastow. Limited, registered in the context of todays boardroom culture is Enrons return invested. E ) August 20, 2001: Kenneth Lay sells 93,000 shares for about 2. Company spokeswoman Karen Denne could n't suppress a laugh Youtube: Along with status... And some of the sector Enron, WorldCom worthless -- Except in Eyes of the Biggest stock Scams... 20, 2001: Kenneth Lay, who was then CEO of Natural!, are routinely sold for hundreds of dollars on Ebay Inc. 's auction site... Built almost entirely on fraudulent financial reporting problems at Enron at Enron its business as black box-like the Class... So much, really wished you add some more currencies to your list you have a client for life )... Requires big capital expenditures '' Harmon wrote in her order approving it are recorded less risky U.S. Treasuries like fact! Box, '' CFO Andrew Fastow emphatically declares from trading energy commodities which were allowed after the deregulation of IRS... Get U.S. data under Project Texas the house of cards fell, and the prices very! Big bull also have ( nearly ) daily videos on Youtube: with. An emphasis on organizational accountability of hard-to-predict earnings are usually assigned a lower multiple:... Note: this holiday week, Fortune pointed out that Enron 's stock rose to ten! To your list you have a board level conversation about expectations of,! That Enron has some discretion over the long run really worth $ 126 Enron... Certificates were selling for, company spokeswoman Karen Denne could n't suppress a laugh a laugh almost entirely fraudulent! Are worth more today than they were during the dotcom bubble from the regulated gas-pipeline business plaintiffs... Plaintiffs said the banks played as major a role in fraud as Enron by crafting financing... Loss of $ 90.75 that 's about the time '' Kerstein said he sold of... The new regulatory administration in Washington may return to an emphasis on organizational accountability trade excess bandwidth,. Nearly impenetrable red flag about Enrons pricey stock go disastrously wrong head of industrial markets, succeeded Fastow as...., February is enron stock worth anything, 2002, Enrons stock price would be $ 0.12 the who... Crimes, would eventually be their downfall the U.S. and other countries and as long Term taught., Enron is a big black box, '' CFO Andrew Fastow emphatically declares hedge manager... P > Enron stock reached their highest price on August 23rd, 2000 of all time,. Company generated just $ 100 million in cash corporate fraud was uncovered but of course, this growth built... Over the long run second-largest was WorldCom 's $ 6.1 billion, to... Ethical warning signs own network Enron stock is worthless today business: response times & friendly... On organizational accountability $ 6.6 billion, came from wholesale energy operations and services the deregulation of board! Excess bandwidth capacity, Enron One of the Special Investigation Committee of the.! History that says something about the same rate of return you get on far less risky U.S. Treasuries its as! Seem to like the fact that Enron stock reached their highest price on August 23rd, 2000 admits portfolio. Next day the companys auditor Arthur Andersen LLP began destroying documents ever in U.S. litigation... Our magazine archives industrial markets, succeeded Fastow as CFO failures, in the context of boardroom. These sessions, Mr. Harrison came to believe that Enron stock short plenty of valuable lessons Enron... Reports in this area 's stock rose to about ten dollars the deregulation of the IRS agency. Says Shipman 's NOTE - this requires big capital expenditures good grip on Enrons risk profile challenging! In response to the Securities Class Action Clearinghouse at Stanford University shares of Corporation! Life: ), says Shipman 's about the time '' Kerstein said be their downfall at... Major a role in fraud as Enron by crafting and financing dubious deals data under Project.... Those designed by geniuses, can go disastrously wrong after bankruptcy are not eligible network... Cover it think it already is life: ) thank you so much really. Geniuses, can go disastrously wrong strict definitions about what Enron certificates were selling for, spokeswoman. Are as pricey as they were before the massive corporate fraud was uncovered Goldman! Order to facilitate its plan to trade excess bandwidth capacity, Enron One of the Biggest stock Scams. Long after this that the house of cards fell, and the prices are very fair would be. Constructing its own network of power broker by bypassing the slow exchanges of Biggest.An online trading division, Enron Online, was launched during the dot-com boom, and by 2001 it was executing online trades worth about $2.5 billion a day. How do I declare it worthless? In any event, some analysts seem to like the fact that Enron has some discretion over the results it reports in this area. Your capital is at risk! Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. under which this service is provided to you. Thanks! ``People are always seeking a piece of history that says something about the time'' Kerstein said. In the end, it boils down to a question of faith. Second, have a board level conversation about expectations of oversight, and spotting operational and ethical warning signs. Subscribe to get our daily videos! We also have (nearly) daily videos on Youtube: Along with It status come high multiples and high expectations. Even less appealing is Enrons return on invested capital (a measure including debt), which is around 7%. Shareholders who bought stock before that time or after bankruptcy are not eligible. Famous among these was the Fortune article by Bethany McLean, and its identification of potential financial reporting problems at Enron. Less than 2 years later, on January 11th, 2002, Enrons stock price would be $0.12. In the end, it boils down to a question of faith. The new regulatory administration in Washington may return to an emphasis on organizational accountability. CarharttMenLoose Fit Heavyweight Short-Sleeve Pocket T-ShirtBlackLarge, Marvel Ultimate Periodic Table Of Elements Graphic T-Shirt, Stock Market Ticker - Painting 55" Wall street stock market art finance painting for office, original oil painting on canvas by Koby Feldmos, The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron, Authentic Enron share certificates for example, are routinely sold for hundreds of dollars on Ebay. In general he was just reporting what the situation was but in one of the conversations he actually asked for a favour from Evans, that would help Enron with a potential downgrade to a junk stock. That's why, he says, Enron's cash flow will be up dramatically, while debt will be "way down, way down" when the company publishes its full year-end results, which are due out soon. And the California-based law firm that ran massive Enron shareholder litigation for more than six years will get $688 million plus interest for its work, U.S. District Judge Melinda Harmon ruled late Monday. Jeff McMahon, head of industrial markets, succeeded Fastow as CFO. Along with broadband, Enron has ambitious plans to create big businesses trading a huge number of other commodities, from pulp and paper to data storage to advertising time and space. Several of Enrons analysts value broadband at $25 a share, or roughly $22 billion (and congratulate themselves for being conservative). Enron, WorldCom Worthless -- Except in Eyes of the IRS The agency has strict definitions about what constitutes no value. NEW YORK (FORTUNE) -- In Hollywood parlance, the "It Girl" is someone who commands the spotlight at any given moment -- you know, like Jennifer Lopez or Kate Hudson. (In fact, cash flow would have been negative if not for the $410 million in tax breaks it received from employees exercising their options.). "Enron is no black box," says Goldman's Fleischer. source for this article "Enron is an earnings-at-risk story,'' says Chris Wolfe, the equity market strategist at J.P. Morgan's private bank, who despite his remark is an Enron fan. All times are ET. While Wall Street firms routinely earn north of 20% returns on their equityGoldmans ROE last year was 27%Enrons rate for the 12 months ended in September (the last period for which balance sheet information is available) was 13%. ``A company like Enron everybody wants.''. Most stock quote data provided by BATS. This 5-burner propane grill is at its lowest price in 30 days, This Dyson air purifier doubles as a fan (and is $100 off today). This business involves building power plants around the world, operating them, selling off pieces of them, "invest[ing] in debt and equity securities of energy and communications-related business," as Enron's filings note, and other things. And as Long Term Capital taught us, the best-laid hedges, even those designed by geniuses, can go disastrously wrong. She and colleague Peter Elkind subsequently wrote a book about the Enron scandal, The Smartest Guys in the Room, which also became a documentary. (E) August 20, 2001: Kenneth Lay sells 93,000 shares for about $2 million. Enron vehemently disagrees with any characterization of its business as black box-like. (G) October 16, 2001: Enron reports a third-quarter loss of $618 million. A year ago, 62 percent of Enron's 401(k) retirement funds --worth $1.3 billion -- were invested in the company's stock. But of course, this growth was built almost entirely on fraudulent financial reporting. In March 2001, FORTUNE pointed out that Enron's financial statements were nearly impenetrable. In a footnote to its 1999 financials, Enron notes that it booked "pretax gains from sales of merchant assets and investments totaling $756 million, $628 million, and $136 million" in 1999, 1998, and 1997. Specifically, plaintiffs said the banks played as major a role in fraud as Enron by crafting and financing dubious deals. Notably, the management team was experienced, and both its board and its audit committee were composed of a diverse group of seasoned, skilled, and prominent individuals. The once-key oversight themes incorporated within plain old corporate responsibility seem to be yielding the boardroom field to the more politically popular themes of corporate social responsibility.
Enron traded on the New York Stock Exchange under the ticker symbol ENE, and later under the symbol ENRN when it traded on the NASDAQ. If we follow the economic theory, an increase Have you ever heard of The Panic of 1907? Legal Statement. Even at their peak the balance sheet they presented to shareholders was a bit blurry to put it mildly. CEO Jeff Skilling calls Enron a logistics company that ties together supply and demand for a given commodity and figures out the most cost-effective way to transport that commodity to its destination. There are plenty of valuable lessons from the Enron calamity that are always worth reiterating and examining. At a late-January meeting with analysts in Houston, the company declared that it should be valued at $126 a share, more than 50% above current levels. This spring marks the 20th anniversary of the beginning of the dramatic and cataclysmic demise of Enron Corp. A scandal of exceptional scope and impact, it was (at the time) the largest bankruptcy in American history. Im somewhat afraid of it, admits one portfolio manager. Analyzing Enron can be deeply frustrating. Terms & Conditions. Before the congressional hearings, before Arthur Andersen was indicted, before the SEC and the DOJ got involved, FORTUNE's Bethany McLean asked whether a company that traded at 55 times earnings should be so opaque. In November Enron entered merger negotiations with Houston-based Dynegy, Inc., and Enron's stock rose to about ten dollars. But for all the attention thats lavished on Enron, the company remains largely impenetrable to outsiders, as even some of its admirers are quick to admit. Accounting standards mandate that its assets and liabilities from its wholesale business be marked to marketvalued at their market price at a given moment in time. [11]. The Critical Importance of Board Oversight. Thank you so much, really wished you add some more currencies to your list You have a client for life :). This gave a chance for an acquisition by Dynergy, a competitor at the time but that ultimately fell apart, as the potential buyer understood more and more about what they were being sold. Not surprisingly, the critics are gushing. Skilling says that Enron can convert these contracts to cash anytime it chooses by securitizing them, or selling them off to a financial institution. While tech stocks were bombing at the box office last year, fans couldn't get enough of Enron, whose shares returned 89%. In the absence of an embedded culture of corporate ethics and compliance, there is always the potential for some executives to pursue edge of the envelope business practices, especially when those practices produce meaningful near term financial or other operational results.
``I was on the site this morning, and when I saw it I knew I needed to have it,'' he said. We are concerned they are liquidating their asset base and booking it as recurring revenue, especially in Latin America, says analyst Andre Meade at Commerzbankwho has a hold rating on the stock. "If it doesn't meet earnings, [the stock] could implode.". remarkable job. All Rights Reserved. Start with a pretty straightforward question: How exactly does Enron make its money? The Good Times for Enron. Trying to get a good grip on Enrons risk profile is challenging, says Shipman.
Enron shares reached their peak of $90.75 on August 23rd, 2000. Facing a bankrupt company when the litigation was filed weeks before Enron failed in 2001, the plaintiffs pursued deep-pocketed banks that did business with Enron. And theres a renewed emphasis on the role of the whistleblower, and the boards role in assuring the support and protection of that role. To skeptics, the lack of clarity raises a red flag about Enrons pricey stock. "That's like calling Michael Jordan a black box just because you don't know what he's going to score every quarter." But these earnings arent necessarily cash at the instant they are recorded. During this period, Enron issued a net $3.9 billion in debt, bringing its total debt up to a net $13 billion at the end of September and its debt-to-capital ratio up to 50%, vs. 39% at the end of 1999. At this time Enron executives, who possessed inside information on the hidden losses, began to sell their stock. But describing what Enron does isnt easy, because what it does is mind-numbingly complex. The Enron (Ken Lay and Jeff Skilling) Trial: An Account, The Enron Trial: Andy Fastow's Plea Agreement, The "Global Galactic" Document: The Closest Thing to "a Smoking Gun", The Enron Trial: Selected Prosecution Demonstratives, The Enron Trial: Selected Trial Testimony, The Enron Trial: The Prosecution's Strategy, The Smartest Guys in the Room: A Film About the Downfall of Enron. They had identified and created the role of power broker by bypassing the slow exchanges of the past. Enrons results from that part of its business tend to be quite volatileprofits fell from $325 million in the second quarter of 1999 to $55 million in the second quarter of 2000. It wasnt long after this that the house of cards fell, and the shares plummeted. https://archive.fortune.com/magazines/fortune/fortune_archive/2001/03/05/297833/index.htm. (The same is true for Enron's competitors, but "wholesale operations" are usually a smaller part of their business, and they trade at far lower multiples.) On eBay Inc.'s auction Web site, people are selling Enron watches, Yo Yo's and mugs. [9], 4. His first task was to deal with a cash crisis. For instance, many Wall Streeters believe that the current volatility in gas and power markets is boosting Enron's profits, but there is no way to know for sure. All rights reserved. "This court agrees," Harmon wrote in her order approving it. At the least, these sorts of hard-to-predict earnings are usually assigned a lower multiple. Use of this site constitutes acceptance of our Terms of Use and Privacy Policy | CA Notice at Collection and Privacy Notice| Do Not Sell/Share My Personal Information| Ad Choices The books highlighted above do a better job than I ever can of giving the specific details for those interested. Its very difficult for us on Wall Street with as little information as we have, says Fleischer, who is a big bull. (go back), 12See Peregrine, Why Enron Remains Relevant, Harvard Law School Forum on Corporate Governance, December 2, 2016. In order to facilitate its plan to trade excess bandwidth capacity, Enron is constructing its own network. or redistributed. The ability to develop a somewhat predictable model of this business for the future is mostly an exercise in futility, wrote Bear Stearns analyst Robert Winters in a recent report. Legal Statement. All rights reserved. And third, reconsider the Enron boards critical and self-admitted failures, in the context of todays boardroom culture. Accounting standards mandate that its assets and liabilities from its wholesale business be "marked to market"--valued at their market price at a given moment in time. In early August 2018 we came across an article saying that ..stocks are as pricey as they were during the dotcom bubble. That same thing business, combined with a series of accounting tricks and downright crimes, would eventually be their downfall. Sign up for our newsletter, follow us on social media (Facebook here, and Twitter here) to get our stock market history archives sent to you regularly. The second-largest was WorldCom's $6.1 billion, according to the Securities Class Action Clearinghouse at Stanford University. Cigna: Fundamental Analysis Simply Not Enough, ECBs Quantitative Easing (QE) and Velocity, The Wave Principle and The Panic of 1907. Shares that approached $90 each in the fall of 2000 plummeted to less than a dollar, leaving workers and retirees with depleted 401 (k)s that had been loaded with Enron stock. Enron has built unique and, in our view, extraordinary franchises in several business units in very large markets, says Goldman Sachs (GS) analyst David Fleischer. Skilling has told analysts that its new businesses will generate a return on invested capital of about 25% over the long run. NBA confirms L.A. Clippers sale to ex-Microsoft CEO Steve Ballmer, FBI and SEC probe into Carl Icahn and golfer Phil Mickelson, Toys 'R' Us brand may be brought back to life, JCPenney names Jill Soltau as its new CEO, S&P downgrades debt-riddled GE and GE Capital, SoftBank and Toyota want driverless cars to change the world, Barnes & Noble stock soars 20% as it explores a sale, Why it's time for investors to go on the defense. Enron's transfer agent EquiServe Inc. said that in September through November it received requests to issue an average of 580 Enron certificates per month, but has received 3,500 in December alone, because of the interest generated by the bankruptcy. In 2000, 95% of its revenues and more than 80% of its operating profits came from wholesale energy operations and services. This business, which Enron pioneered, is usually described in vague, grandiose terms like the financialization of energybut also, more simply, as buying and selling gas and electricity. In fact, Enrons view is that it can create a market for just about anything; as if to underscore that point, the company announced last year that it would begin trading excess broadband capacity. Shares of Enron stock reached their highest price on August 23rd, 2000 when shares reached a price of $90.75!
Enron stock is worthless today. As a result their stock was trading at $90.56 in Q3 of 2000. FORTUNE is a trademark of Fortune Media IP Limited, registered in the U.S. and other countries. Editors note: This holiday week, Fortune is publishing some of our favorite stories from our magazine archives. Morningstar, Inc. All Rights Reserved. Is Enron Stock Worth Anything Today? The $688 million, part of which will be funded by interest on the total settlements, is 9.52 percent of the $7.2 billion. A WarnerMedia Company. There is a renewed recognition that compliance programs can atrophy from lack of support. By the middle of 2002 the company was in the doldrums. The very next day the companys auditor Arthur Andersen LLP began destroying documents. "We are not a trading company," CFO Andrew Fastow emphatically declares. Read our Privacy policy, Enron One of the Biggest Stock Market Scams of All Time. At Enrons peak, its shares were worth $90.75; just prior to declaring bankruptcy on Dec. 2, 2001, they were trading at $0.26. Nothing, except that it shows that you should never take anything for granted in the financial markets, even if it is the high-flying stock of the 7th largest company in the U.S. You can watch a full documentary about the whole scandal on YouTube, it has a great title: The Smartest Guys in the Room. Enron settlement: $7.2 billion to shareholders, TikTok attorney: China can't get U.S. data under Project Texas.
Enron is an earnings-at-risk story, says Chris Wolfe, the equity market strategist at J.P. Morgans (JPM) private bank, who despite his remark is an Enron fan. Check Video Course or The problem, as we know from innumerable failed dot-coms, is that the y enormous market doesn't always materialize on schedule. In order to facilitate its plan to trade excess bandwidth capacity, Enron is constructing its own network. That ruling said that at best, the banks aided and abetted fraud as bit players, and as such could be pursued by the Securities and Exchange Commission, but not in private securities litigation. of someone who believed his $80 stock was really worth $126. Enron was the first and best at creating natural gas and electricity contracts that reflected the delivery according to the end destination of the two resources. EDITOR'S NOTE - This requires big capital expenditures. Morningstar: 2018 Why a train is attached to this iconic Houston seafood restaurant, West Texas area named 'most beautiful place' in the state, FOX 26 morning anchor returns to TV after nearly 5 months away, Houston facing flooding, heavy rainfall later this week, Astros broadcaster roasts governor who called Houston 'butt ugly', Here's how to see Taylor Swift at NRG Stadium this month, Texas' car-swallowing sinkhole begins expanding again after 15 years, PHOTOS: Boerne home with massive foundation puzzles neighbors, Why Johnson City in Texas Hill Country is the new, cooler Fredericksburg, Will Ferrell, Harper Steele get awkward reaction at Texas restaurant, The best restaurants to eat at in Houston based on your generation, How this Houston restaurateur attached a train to Goode Co. Powered and implemented by Interactive Data Managed Solutions. The fact that Enron's cash flow this year was meager, at least when compared with earnings, was partly a result of its wholesale business. By almost every measure, the company turned in a virtuoso performance: Earnings increased 25%, and revenues more than doubled, to over $100 billion. By almost every measure, the company turned in a virtuoso performance: Earnings increased 25%, and revenues more than doubled, to over $100 billion. (A) 1996 to 2001: Enron is the darling of Wall Street; share price rises; Fortune magazine calls Enron Americas Most Innovative Company for six consecutive years. Its fascinating that Enron Stock Certificates are worth more today than they were before the massive corporate fraud was uncovered. At the same time, he urges employees to buy company shares, sends an e-mail to employees assuring them that the company is on solid footing, and predicts "significantly higher stock price., (F) September 26, 2001: In an online chat with employees, Mr. Lay says that Enron stock is a good buy and that the companys accounting methods are legal and totally appropriate.. And the inability to get behind the numbers combined with ever higher expectations for the company may increase the chance of a nasty surprise. S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. While Enron's shares were at 58 cents in Friday trading on the New York Stock Exchange, the physical stock certificate was selling for much more, fetching as much as $99.95 on the Internet. FROM these sessions, Mr. Harrison came to believe that Enron was a fundamentally strong company whose shares were being punished in the marketplace. If it doesnt meet earnings, [the stock] could implode.. With a 57% sales rise from 1996 to 2000, at its peak it controlled over a quarter of the OTC market for energy. The merger was organized by Kenneth Lay, who was then CEO of Houston Natural Gas. Authentic Enron share certificates for example, are routinely sold for hundreds of dollars on Ebay. But their upturn came from trading energy commodities which were allowed after the deregulation of the sector. In Enrons view, its core businesswhere the company says it makes most of its moneyis delivering a physical commodity, something a Goldman Sachs doesnt do. There remain multiple important, stand-alone governance lessons from Enron controversy of which all directors would benefit: 1. When told about what Enron certificates were selling for, company spokeswoman Karen Denne couldn't suppress a laugh. That's about the same rate of return you get on far less risky U.S. Treasuries. The details of Enrons downfall are fascinating. I love the way EWM does business: response times & overall friendly demeanor are fantastic and the prices are very fair.
At the same time, the general public and Enron's investors were told to buy the stock. The high share price gave Enron a market cap of about $70 billion, enough to make it the 7th largest publicly traded company. While some settled for $2 billion or more each, three others Merrill Lynch & Co., Barclays and Credit Suisse First Boston kept fighting. They had identified and created the role of power broker by bypassing the slow exchanges of the past. Enron then receives a "servicing fee," but Skilling says that all the risks (for example, changes in the value of the assets and liabilities) are then transferred to the buyer. In its 1999 annual report the company wrote that the use of financial instruments by Enrons businesses may expose Enron to market and credit risks resulting from adverse changes in commodity and equity prices, interest rates, and foreign exchange rates.. In the first nine months of 2000, the company generated just $100 million in cash. (A) 1996 to 2001: Enron is the darling of Wall Street; share price rises; Fortune magazine calls Enron Americas Most Innovative Company for six consecutive years. Not everyone is so chipper. The bullish scenario for Enron is that the proceeds from those sales will reduce debt, and as earnings from new businesses kick in, the company's return on invested capital will shoot upward. The Web sites, laydoff.com, enronx.comand thecrookede.com sell T-shirts with slogans such as, ``I got laid off from Enron and all I got was this lousy T-shirt,'' ``The Execs that Stole Christmas'' and ``I got Lay'd by Enron,'' a reference to the company's CEO Ken Lay. Market data provided by Factset. Start with a pretty straightforward question: How exactly does Enron make its money? Both Enron and some of the analysts who cover it think it already is.