Enron's nightmare
At the beginning of 200 1, Jim Cheos, the boss of a reputable short-term investment institution, publicly expressed doubts about Enron's profit model. He pointed out that although Enron's business looks brilliant, it actually doesn't make money, and no one can tell how Enron made money. According to his analysis, Enron's profit margin was 5% in 2000, and it fell below 2% at the beginning of 200/kloc-0. For investors, the return on investment is only about 7%.
Cheos also noticed that some documents involved the partnership companies behind Enron, which had unclear behind-the-scenes transactions with Enron. As the CEO of Enron, Skilling has been selling his Enron stock-he has always claimed that Enron's stock will rise from about 70 dollars at that time to 65,438+026 dollars. Moreover, according to American law, members of the board of directors of a company cannot throw out the shares of the company without leaving the board of directors.
Perhaps it is this that has aroused people's doubts about Enron and started to really investigate Enron's profitability and cash flow direction. By mid-August, people had more and more doubts about Enron, which eventually led to the stock price falling. On August 9, Enron's share price has dropped from about $80 at the beginning of the year to $42.
10 6 16, Enron announced the financial report for the second quarter of 2006, announcing that the company's total loss was 6180,000 USD, that is, the loss per share was 1. 1 1 USD. At the same time, it was disclosed for the first time that due to the improper management of Chief Financial Officer Andrew fastow and the partnership company, the assets of the company's shareholders shrank by $654.38+0.2 billion.
10 year 10 On October 22nd, the US Securities and Exchange Commission aimed at Enron and asked the company to automatically submit the details of certain transactions. Finally, on June 3 10, Enron and its partner companies began a formal investigation.
On June 1 65438+1October1day, Enron mortgaged part of the company's assets and obtained a credit line guarantee of US$ 65,438 billion from JPMorgan Chase and Salomon Smith Barney, but Merrill Lynch and Standard & Poor's downgraded Enron again.
165438+1October 8, Enron was forced to admit that it had made false accounts, and the number of false reports was staggering: since 1997, Enron has falsely reported profits of nearly 600 million dollars.
165438+1On October 9th, Dinoki Company announced that it was prepared to buy Enron for $8 billion, and assumed the debt of1300 million. Enron's share price fell by 0. 16 USD at midday that day.
165438+1On October 28th, Standard & Poor's downgraded Enron's debt rating to "junk bonds".
165438+1On October 30th, Enron's share price fell to $0.26, and its market value dropped from $80 billion at its peak to $200 million.
On February 2, 65438, Enron formally applied to the bankruptcy court for bankruptcy protection. The assets listed in the bankruptcy list are as high as $49.8 billion, making it the largest bankrupt enterprise in American history. On the same day, Enron also filed a lawsuit with the court, claiming that Dinoki's suspension of its merger was illegal and demanding compensation.
The bankruptcy of Enron model
First of all, Enron's management has been questioned, including the board of directors, the board of supervisors and the company's senior management. The charges they face include dereliction of duty, making false accounts, misleading investors and seeking personal gain.
10 Before Enron released its second quarter financial report on June 6, all investors were happy to see Enron's financial report. Look at Enron's past financial reports: in the fourth quarter of 2000, "the company's natural gas business tripled, and the company's energy service company's retail business tripled"; In the first quarter of 200/kloc-0, "the quarterly revenue increased by four times, which is the fiscal quarter of 2 1 continuous profit growth" ... In Enron, the unit to measure business growth is not percentage, but multiple, which makes all investors smile. 200 1 in the second quarter, the company suddenly lost money, with a loss as high as 6180,000 USD!
Then, the partnership companies that have been hidden behind Enron began to surface. After investigation, most of these partnership companies are controlled by Enron's top management, and Enron's huge foreign loans are often included in these companies, not on Enron's balance sheet. In this way, Enron's huge debt of $654.38+03 billion will not be known to investors, and some Enron officials also seek personal gain from these partnership companies.
What makes investors even more angry is that it is obvious that Enron executives are very familiar with the problems in the company's operation, but they have turned a blind eye for a long time and even deliberately concealed them. On the one hand, many board members, including CEO skilling, advocate that the share price will continue to rise, on the other hand, they are secretly selling the company's shares. Seven of the company's 14 members of the board of supervisors have a special relationship with Enron, either trading with Enron or working for a non-profit organization supported by Enron, turning a blind eye to Enron's various misdeeds.
Enron's false accounting problem also puts its audit company Andersen in danger of being sued. As the auditor of Enron's financial report, Andersen, the fifth largest accounting firm in the world, neither audited Enron's false profits nor found its huge debts. In June this year, Andersen was fined $7 million by the US Securities and Exchange Commission for fraud in its audit work.
Enron's core business is the trading of energy and its related products, but in Enron, this kind of trading is called "energy trading". According to reports, this kind of business is based on credit, that is, energy suppliers and consumers establish contracts through Enron, and promise to fulfill their contractual obligations within a few months or years. In this kind of transaction, Enron, as a "middleman", can improve its performance in a short time. Because this kind of business is based on the credit of intermediaries, once there is any scandal in Ping An, its credit will be greatly discounted and the business will be in danger of immediate closure.
In addition, this business model also has a significant impact on Enron's cash flow direction. Most of Enron's business is based on "futures market" contracts. Although the income from the contract is included in the company's financial statements, it will not bring any cash to Enron before the performance of the contract. The more contracts are signed, the greater the gap between the book figures and the actual cash income.
An important reason why Enron is unwilling to admit that it is a trading company is to raise its share price. As a trading company, it is difficult to be overvalued in the stock market because of the inherent risk of unstable trading returns. At its peak, Enron's market value reached 70 times or more of its profits.
In order to maintain its self-proclaimed "world leading company" status, Enron's business has been expanding, including not only traditional natural gas and electricity business, but also wind power generation, hydropower generation, investment, timber, advertising and so on. In 2000, broadband business flourished and Enron invested in broadband business.
After all this, Enron finally pulled out a hole as high as $6 1 80,000 on the balance sheets of 200 1 and1.
The aftermath of bankruptcy is hard to calm down
In the Enron bankruptcy case, the investors who suffer the most are undoubtedly those investors, especially ordinary investors who still hold a large number of Enron shares. According to American law, after applying for bankruptcy protection, Enron's assets will be given priority in paying taxes, repaying bank loans and paying employees' wages. After such a toss-up, investors will definitely lose everything.
In order to recover the loss, investors have to file a lawsuit. According to American law, stock market investors can sue Andersen for failing to perform their duties in financial audit. If the court decides that the charges are established, Andersen will have to compensate them for their losses.
Also affected by this incident are Enron's trading partners and those big financial consortia. According to statistics, in the Enron bankruptcy case, D uk e E Group lost $6,543.8 billion, Millent Company lost $80 million and Dinoki lost $75 million. Among the consortia, JPMorgan Chase and Citigroup suffered heavy losses. JPMorgan Chase's unsecured loans to Enron alone amounted to $500 million, and it is said that the losses of Citigroup are similar. In addition, Enron's creditors include Deutsche Bank and Japan's three major banks.