Start with a pretty straightforward question: How exactly does Enron make its money? Details are hard to come by because Enron keeps many of the specifics confidential for what it terms "competitive reasons. Even quantitatively minded Wall Streeters who scrutinize the company for a living think so. And the inability to get behind the numbers combined with ever higher expectations for the company may increase the chance of a nasty surprise.
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Remember When Enron was Overpriced? The price of Enron stock amazingly rose during the dot com boom and bust. At the turn of the century, the stock market rose and fell amidst the dot com boom and bust. Technology firms rose to the forefront, only for an innumerous amount of firms to crash and burn. In the midst of this chaos was Enron. Interestingly enough, Enron was an energy company who did not fit the new age technology description. Is Enron Overpriced?
She spoke to Enron executives and market analysts to get a better picture of the company. No analysts could explain how Enron got its stock price so high. While the analysts could not fully understand how Enron worked, Enron refused to give details about their operations. Furthermore, Enron guarded its financial information as much as possible. This raised many eyebrows, but most analysts backed off. At the same time, the Enron employees who were aware of what was going on please note that most employees were not aware kept quiet.
This, in turn, produced an inconsistency in key financial indicators. What supposedly had been a smooth-running business model was actually a rather complex long-term, get-rich-quick scheme by Enron executives. Indeed, Bethany McLean was right: Enron was overpriced. Despite a landmark rise to the top of the market, Enron could no longer sustain its success. In a matter of months, Enron collapsed into bankruptcy, with innumerous employees and shareholders losing their retirement savings.
This would lead the government to step in and create what is now known as the Sarbanes-Oxley Act. Enron was overpriced and its success was a sham. The current economy or lack thereof is largely due to deceptive and irresponsible business practices of the executives of large companies. In trying to get ahead financially, these executives ruined their companies and poisoned the fiscal health of millions of people. Despite the fall of Enron happening nine years ago, it remains relevant; Sarbanes-Oxley reiterates this.
Now, when executives, employees, analysts, and shareholders evaluate business practices and reported results, they should never take success for granted. Rather, they should always remember when Enron was overpriced. Sources: Clausen, James. Accessed May 3, DeGrande, Barbara. Keeffe, Philip. McLean, Bethany. March 5, Reprinted on CNN. McLean, Bethany and Peter Elkind.
New York: Penguin Books, The Smartest Guys in the Room. Alex Gibney. Peter Coyote. Magnolia, Posted by.
Is Enron Overpriced? Its financial statements are nearly impenetrable. So why is Enron trading at such a huge multiple? Not surprisingly, the critics are gushing. Along with "It" status come high multiples and high expectations.
Its financial statements are nearly impenetrable. So why is Enron trading at such a huge multiple? Not surprisingly, the critics are gushing. Along with "It" status come high multiples and high expectations.