Short Ideas about Enron Company
Enron was an energy company that also provided services and commodities. The company was founded in 1985 by Kenneth Lay as a merger company from Houston Natural Gas and InterNorth. After the hiring of CEO Jeffrey Skilling, Enron expanded into as many markets as they could between the 1990’s and early 2000’s.
They began to heavily invest in energy assets across the globe and attempted to become of a hedge fund for energy commodities. In 1991 they created a sub company called Enron Capital and Trade. As they grew larger they invested in overseas natural gas and power companies, buying them out for larger long term profits. According to Enron’s financial statements by 1996, 25% of Enron’s earnings came from their international Enron companies.
Our writers can help you with any type of essay. For any subjectGet your price
How it works
Enron was also pulled into the internet age. They built their own fiber optic cable lines and made their own data company called FTV Communications LLC to attempt to limit data costs and spread into new markets. With all this reported growth and earnings, Enron was labeled by the fortune 500 as the most innovative company for several years. By the end of August in 2000, Enron’s stock price reached an all time high of $90.75.
Yet a year later in November 2001 the share price was less than one dollar. What had happened? According to Michele Peetz in “Examining Enron, in January of 1992, the SEC agreed, and Enron eventually applied the mark-to-market accounting treatment in their business practices. This would allow Enron to report their assets based on what the on going market would pay for them, and not actually how much they are worth in their books.
This would allow Enron to report unprecedented values that they actually didn’t have. According to Professor Linder from famous trials.com, October 16th, 2001, Enron reported a third quarter loss of 618 million dollars. So what caused this energy giant’s stock and earnings to plummet when only a few months earlier they were at their highest success?