Enron Faces Bankruptcy After Merger Nixed
N E W Y O R K, Nov. 28 -- Earlier this year, energy giant Enron was No. 7 in the Fortune 500. Today it is a worth less than $1 a share and on the verge of collapse.
In a decision that could spell the end for the Houston-based firm, Dynegy Inc., one of its chief rivals, called off its proposed deal to buy Enron today. And analysts believe there are no other white knights out there interested in taking over Enron. The company's credit rating was downgraded to junk status by two major ratings firms, Standard & Poor's and Moody's.
Earlier in the day, trading in Enron and Dynegy stocks was halted for two hours. Enron stopped trading at $1.20. It reopened at 91 cents and closed the day at 62 cents. Dynegy, also based in Houston, closed at $35.96, down $4.93 on the day.
Enron's deflated stock price represents a stunning reversal for a company that reached a high of $84.87 a share a year ago.
With the collapse of the proposed Dynegy-Enron merger, it is now likely that Enron will file for bankruptcy.
Thirty days ago Enron was the leading energy trading company in the United States. Today, its key business — Enron Wholesale Services — is virtually worthless.
Jon Kyle Cartwright, an analyst with Raymond James in St. Petersburg, Fla., said it is likely the company will file for bankruptcy, but added, "It is a complicated company with complicated assets, and it could take a year or more for the case to be resolved."
Enron depended a lot on its Wall Street reputation, but over the past few weeks its credibility declined rapidly. Its core business will shut down, as it deals primarily with "counter-party trading."
In recent years Enron had shifted its focus from operating pipelines and other energy assets, and had emphasized buying and selling power wholesale.
But for most of 2001, and in recent weeks especially, Enron's practices have come under increasing scrutiny. The company revealed last month it had omitted about $500 million in debt from its financial statements, and is the subject of a Securities and Exchange Commission inquiry.
