$80 BILLION to $400 Million In One Ugly Fall

[Joubert[$]]

Enron was the energy industry's darling. Business schools used the company as a case study. The company's management was lauded and it was a soon a Fortune 50, trading in the 20s and climbing. Last year it was ranked #7 in size among US companies. Its market cap was $80 billion - that's with a b - and analysts were confidently predicting a stock split before the recession in order to bring the trading price back to a manageable level?

Today, the stock that was $80 plus a year ago closed at 61 cents a share. For the average investor who put $1000 in Enron a year ago, their stock (net of commissions) was worth $7 at today's market close.

$1000 last year. $7 today. Just what happened?

That's what the SEC is going to find out. Enron has announced that it will most likely be unable to continue as a going concern - accounting speak for we're probably closing. Enron said last month that it would lose $600 million for the quarter. That's bad, but survivable. Bankruptcy filings will most likely occur Thursday amidst allegations and some admissions that the company's financials were incomplete and potentially doctored. There were management mistakes, to be sure, but the most damning problem was the lack of confidence analysts and suitor Dynegy began experiencing.

Dynegy, a much smaller competitor, offered a buy out when the stock crashed to $10 last week. Morgan Chase and Citi both pumped a billion into the company to keep it solvent. Now its bond rating has been slashed to junk territory, Dynegy has pulled its offer after attempting today to renegotiate the price and the company likely won't see December 31.


The ex-dividend date was November 29. Obviously Enron wasn't going to pay a dividend, but when was the last time you heard of a company with a billion plus market cap losing 80% of its value in one day - the day before its dividend date? More than 340 million shares of Enron were traded Wednesday. Rest assured that virtually all were sell orders.

Even if you don't hold energy stocks, or Enron specifically, you may be expected. Enron's disruption means that natural gas and energy supplies could also be disrupted this winter. Demand in the east has been slashed due to higher than normal temperatures, but there is snow in the ground in parts of the country and falling mercury in others. With Enron gone, new partnerships and alliances will have to be formed to keep the heat going - and at potentially higher rates since any firms now taking up this mantle will not have the scale the former energy giant enjoyed.

Even investors who stick to mutual funds or steered clear of energy stocks entirely took a hit Wednesdy when a combination of profit-taking and Enron's demise dropped the Dow to another three digit loss, easing the momentum that had been building all week.

Regulators and analysts who once praised the Houston company for its success in a deregulated world will now spend months, possibly years, trying to determine if that very climate of deregulation proved disruptive to prices during the winter of '01.

[amykhar]

Wow. I can't imagine how that poor CEO must feel.

I also have to hope that the higher fuel oil prices don't really zap me this winter. Americans really don't need higher bills right now with the economy the way it is.

Amy

Ken Lay? Total scumbag in a suit.

Look at the Insider track record on Yahoo to see him flipping and selling options as fast as he can accrue them. All the while, Enron's publishing and Spamming and posting employee campaigns to keep them up on investing in the company to "save it." When that fails, they change their 401-k plan managers so that a blackout period can keep the employees from bailing money out of the company as all of these CRIMINAL misreporting of losses and revenue shortfalls come to light.

I know quite a few folks down here who work for Enron/EBS here in Houston... last weekend was a major drunk weekend for a lot of them, wondering why they dumped so much of their 401-k into the company to watch it all vanish. How will their kids go to college?

Some other consqeuences of this collapse:
- Dividends will most likely NOT be paid.
- Enron was mentioned specifically in one of the economic stimulus package for a tax-rebate (ie. corporate welfare) return. Watch for lots of screaming over that.
- Enron Field will remain Enron Field until they miss their first payment of the 30-year, $100 million naming rights contract.
- Compaq, Continental, Enron... the job market here is an absolute mess.

[kurt_messick]

I remember the big silver fiasco in DFW area some time ago. Was it the Hunt brothers? (And why does it seem to happen a lot in Texas?)

Anyway, there was a running joke (not so funny, actually) for a while:

Q.: How do you make a small fortune?
A.: Start with a large one...

Congress now wants to investigate...

This means, of course, all remaining assets will be turned into campaign contributions for W., Kay Bailey Hutchinson, and whomever wants to replace Phil Gramm.

*sheesh*

[Joubert[$]]

File is correct (well, I don't know about the diversion of funds, but ...) in saying there will now be congressional hearings. First topic to tackle: did Enron violate pension laws?

Some might argue that this is simply another example of going after Capone for income tax or suspected terrorists for immigration issues, but any good law enforcement type will tell you to target the person and then build your case.

[amykhar]

http://dailynews.yahoo.com/h/nm/2002...ron_dc_23.html

[Joubert[$]]

I wish I could say that I was prescient, but this one was a gimmee. I'm a little surprised the delisting took this long.

[sfarmer76]

Laydoff.com... they have a lot of good links to the whole Enron mess. I've put some links to the Enron story in my Politics folder on Backflip if anybody is interested.

[sfarmer76]

http://www.markfiore.com/animation/kenny.html