Enron Faces Bankruptcy After Merger Nixed
N E W Y O R K, Nov. 29 -- Earlier this year, energy giant Enron was No. 10 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 Wednesday. 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.
Trading in Enron and Dynegy stocks was halted for two hours Wednesday with Enron at $1.20. After reopening at 91 cents it closed the day at 62 cents. Dynegy, also based in Houston, closed at $35.96, down $4.93 for the day.
Today, the stock sank even further, closing at 36 cents, down an additional 25 cents since Wednesday. Trading activity set a second-largest volume record with 164,280,800 shares changing hands.
The stock's poor performance has triggered some talk of delisting. The New York Stock Exchange would decide when and if to pull the stock from trading.
If Enron files for bankruptcy — a highly plausible step now that the proposed merger with Dynergy is off — the NYSE would typically conduct a quick review of the company's equity and decide if there is any left.
The NYSE can also start the review process if either the stock continues to trade below a dollar for 30 days, market capitalization sinks below $50 million, the number of shares outstanding drops below 600,000 or the average monthly trading volume is below 100,000.
Rapid and Near-Fatal Drop
Enron's deflated stock price represents a stunning reversal for a company that reached a high of $84.87 a share a year ago.
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."
