The rise and fall of enron

by | Sep 12, 2017

Did you know?

The collapse and bankruptcy of American energy company Enron is one of the most famous business scandals in history. The company was tipped as one of America’s most innovative businesses and was the darling of Wall Street, drawing in investors from far and wide. In 2001 however, it became clear that the firm had been involved in major accounting scandals bordering on fraud which had been carried out throughout the 1990’s. These practices had been used to create the perception that Enron was far more profitable than it actually was, causing the stock price to rise.

Executives told the investors that the stock would continue to increase until it attained possibly the $130 to $140 range, while secretly unloading their shares. In August 2001, CEO Jeffrey Skilling unexpectedly announced his resignation and the price tumbled below $40. 

In October the same year, Enron reported a $618 million Q3 loss and $1.2 billion reduction in shareholder equity. In November, the company was required by law to revise its profits for the 5 years beforehand. The company had overstated its earnings by $567 million. When the firm filed for bankruptcy that month, it was revealed the audited balance sheet had understated the company’s long term debt by over $25 billion. The share price totally collapsed to a mere 30 cents. When it was all over, 16 people had pleaded guilty to Enron-related charges including securities fraud, conspiracy and false statements. 

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ALL RIGHTS RESERVED © INVSTR LTD. 2017

Risk Disclosure:
Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.
Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.
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