Revisiting Enron: The Outside View

By Ben Dell’Orto IAC Student Intern Fall 2018

Everybody is interested in a shooting star.

By the end of the year 2000, while people were concerned about Y2K, Enron was valued at $83.13 per share after growing from a natural gas company to a diversified behemoth. Over the prior two years, the company had experienced huge increases in value, a miracle investment, reaching a 52-week high of $92.56 on August 23, 2000. By August 14, 2001, the value had dropped to $42.93. By December 2, 2001, the company had filed for bankruptcy.

We’ll address what caused this spectacular downfall, and the response afterward, over the next few posts. For now, we’re going to consider a simple question: what did this fund look like to the average investor at the time?

For this we’ll take a look at a few news sources discussing the company around that peak in August 2000.

CNN called Enron one of its “10 stocks to last a decade,” citing Enron’s diversification. Indeed, from the outside it appeared that a natural gas company to a business involved in many industries including e-commerce and becoming a leader in broadband communications.

The Economist praised the company’s founder and CEO Kenneth Lay “the energetic messiah,” praising Enron as a “new-economy company” for the same reasons cited by CNN.

Forbes celebrated Enron’s deal with Blockbuster to carry an on-demand service over its broadband network.

To an investor, Enron appeared like a sure thing led by a man who had somehow found the answers to creating a 21st century-proof company that would not only survive but thrive in the new millennium. Indeed, given the advent of streaming services over the past few years, the Blockbuster deal seems like a vision of the future.

However, behind the scenes, things were not as clear.