enron mentions enron replaces andrew fastow as cfo amid sec inquiry ( updatel )
bloomberg - 10 / 24 / 01
enron shares drop for sixth day on stock downgrades ( update 5 )
bloomberg - 10 / 24 / 01
enron , fincl chief - 2 : mcmahon replaces andrew fastow
dow jones news service - 10 / 24 / 01
stockwatch enron falls 20 pct on worries deals with ljm will impact earnings
afx news - 10 / 24 / 01
usa : enron shares take midday battering , off over 20 pct .
reuters english news service - 10 / 24 / 01
usa : research alert - enron stock drops on ' sell ' rating .
reuters english news service - 10 / 24 / 01
analyst reports on enron
cnnfn : market coverage - 10 / 24 / 01
uk : credit costs surge on embattled enron - telcos ease .
reuters english news service - 10 / 24 / 01
enron may need several hundred mln usd to meet shortfalls at investment units
afx news - 10 / 24 / 01
enron shares plummet again
drop comes on heels of five straight losing sessions
cbs marketwatch . com - 10 / 24 / 01
enron ' s bonds tell the tale : stay away
realmoney . com - 10 / 24 / 01
waiting for the other shoe to drop on enron
realmoney . com - 10 / 24 / 01
enron ' s excuses sound familiar
realmoney . com - 10 / 24 / 01
fool on the hill
enron ' s disdain for investors
the motley fool . com - 10 / 24 / 01
bonds of troubled enron quoted in dollars , not spreads
capital markets report - 10 / 24 / 01
usa : group to put corporate directors under microscope .
reuters english news service - 10 / 24 / 01
enron replaces andrew fastow as cfo amid sec inquiry ( updatel )
2001 - 10 - 24 16 : 43 ( new york )
enron replaces andrew fastow as cfo amid sec inquiry ( updatel )
( adds statement from enron ' s kenneth lay in second
paragraph . )
houston , oct . 24 ( bloomberg ) - - enron corp . ousted chief
financial officer andrew fastow amid a securities and exchange
commission inquiry into partnerships he ran that cost the largest
energy trader $ 35 million .
enron named jeff mcmahon , head of its industrial markets
group , as cfo because ` ` it became clear to me that restoring
investor confidence would require us to replace andy , ' ' chairman
and chief executive officer kenneth lay said in a statement .
fastow will take a leave of absence .
shares of enron , based in houston , fell as much as 22 percent
today after analysts downgraded the stock . the company said on
monday that the sec had begun an inquiry into partnerships fastow
ran .
enron fell $ 3 . 38 , or 17 percent , to $ 16 . 41 , the sixth
straight day of decline . earlier , the shares touched $ 15 . 51 , their
lowest since february 1995 . the stock plunged 21 percent on
monday , after enron disclosed that the sec had requested
information on the partnerships .
the stock fell after lay failed to ease concerns about the
sec inquiry or enron ' s financial reporting in a conference call
yesterday . investors have criticized lay for not disclosing enough
about the workings of investment vehicles such as fastow ' s
partnerships . the stock has fallen 57 percent since oct . 11 ,
losing more than $ 15 billion in market value .
enron shares drop for sixth day on stock downgrades ( update 5 )
2001 - 10 - 24 16 : 43 ( new york )
enron shares drop for sixth day on stock downgrades ( update 5 )
( updates with closing share price and fastow on leave of
absence in second paragraph . )
houston , oct . 24 ( bloomberg ) - - shares of enron corp . fell 17
percent after several analysts downgraded the stock and the u . s .
securities and exchange commission began an inquiry into
partnerships run by chief financial officer andrew fastow .
enron fell $ 3 . 38 to $ 17 . 08 , dropping for the sixth day in a
row . it was the biggest percentage decline among stocks in the
standard & poor ' s 500 index . earlier , the stock touched $ 15 . 51 ,
the lowest since february 1995 . after the close of regular u . s .
trading , enron said fastow will take a leave of absence , and jeff
mcmahon was named chief financial officer .
chief executive officer kenneth lay failed to ease concerns
about the sec inquiry or enron ' s financial reporting in a
conference call yesterday . investors have criticized lay for not
revealing enough about the workings of investment vehicles such as
fastow ' s partnerships . the stock has fallen 57 percent since oct .
11 , losing more than $ 15 billion in market value .
` ` enron ' s conference call began as a methodical review of
current liquidity and deteriorated into an inadequate defense of
the balance sheet , ' ' lehman brothers analyst richard gross wrote
in a report . he left his ` ` strong buy ' ' rating unchanged .
other analysts lowered their ratings , including carol coale
at prudential securities who downgraded enron to ` ` sell ' ' from
` ` hold . ' ' anatol feygin of j . p . morgan dropped his rating to long -
term ` ` buy ' ' from ` ` buy . ' ' first albany corp . ' s robert christensen
downgraded the stock to ` ` buy ' ' from ` ` strong buy . ' '
possible downgrade
moody ' s investors service last week placed all $ 13 billion of
the company ' s long - term debt securities on watch for possible
downgrade . a reduction in the rating could cut houston - based enron
off from the commercial paper market , raising the costs of short -
term debt .
enron said earlier this month that dealings with the fastow
partnerships contributed to $ 1 . 01 billion in third - quarter losses .
enron has at least 18 such partnerships , which were created to
move debt off its books and lower its tax liabilities as well as
dispose of assets .
an investor has sued enron saying that fastow ' s leadership of
the partnerships , as well as membership on their boards by other
enron executives , is a conflict of interest . the company has $ 3 . 3
billion in potential liabilities attached to such investment
vehicles , the wall street journal reported today .
` ` i don ' t know that we were aware of everything going on with
enron , ' ' said jim walline , manager of the lutheran brotherhood
fund , which owned 93 , 060 shares on sept . 1 . ` ` we had a lot of
confidence and clearly that has been busted a little . ' '
enron , fincl chief - 2 : mcmahon replaces andrew fastow
10 / 24 / 2001
dow jones news service
( copyright ( c ) 2001 , dow jones dow jones newswires ; 201 - 938 - 5400
stockwatch enron falls 20 pct on worries deals with ljm will impact earnings
10 / 24 / 2001
afx news
( c ) 2001 by afp - extel news ltd
new york ( afx ) - shares of enron corp were sharply lower in afternoon trade , falling over 20 pct , as investors sold the stock a third day running on concerns that financial transactions made with related party ljm could negatively impact future earnings , dealers said .
at 2 . 15 pm , enron was down 4 . 06 usd , or 20 . 52 pct , at 15 . 73 .
the djia was up 9 . 76 points at 9 , 349 . 77 , and the s & p 500 composite index was up 0 . 92 at 1 , 085 . 70 , while the nasdaq composite fell 22 . 42 to 1 , 726 . 96 .
the company confirmed yesterday that the securities and exchange commission requested the company to provide information on certain related - party transactions .
many analysts responded by cutting the shares ratings on concerns that dealings with the related ljm partnership could affect future earnings , after two class actions were filed against the company yesterday .
the two lawsuits claim that enron issued statements which failed to disclose that the company was experiencing a declining demand for bandwidth and that its efforts to create a trading market for bandwidth failed because many market participants were not credit worthy .
the company ' s operating results were also " materially overstated as result of the company failure to timely write down the value of its investments with certain limited partnerships " managed by the company ' s cfo .
the suit additionally alleged that enron failed to write down impaired assets on a timely basis in accordance with gaap ( generally accepted accounting principles ) .
in its third - quarter results last week , enron announced a charge of 1 . 01 bln usd , or 1 . 11 usd per share , and an incremental 1 . 2 bln usd reduction in stockholders ' equity , related to the unwinding of investments with the ljm partnerships .
jp morgan analyst anatol feygin said he has downgraded the stock to a ' long - term buy ' from a ' buy ' in " the wake of lingering concerns regarding the company ' s credit situation and management disclosure of liabilities stemming from off - balance sheet financing vehicles . "
the stock has been removed from jp morgan ' s " focus list " .
feygin also said that " management ' s conference call yesterday morning was a missed opportunity to disclose the necessary information to assuage investor concerns . "
goldman sachs analyst , david fleischer also agreed that enron ' s disclosure was " modest " and " management did not resolve concerns . "
however , credit concerns and questions about potential liabilities are " very much exaggerated , " he said
" the real issue will turn out to be huge debt that enron was placing in these entities . "
the shares ' value have fallen by more than 40 pct since enron reported charges related to investments with ljm last week , but fleischer said he sees no recovery until management fully answers investor questions and restores credibility , an outcome he expects in future weeks .
blms / gc for more information and to contact afx : www . afxnews . com and www . afxpress . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : enron shares take midday battering , off over 20 pct .
by janet mcgurty
10 / 24 / 2001
reuters english news service
( c ) reuters limited 2001 .
new york , oct 24 ( reuters ) - shares of enron corp . plunged further in midday trade on wednesday , hugging the top spot on the list of biggest losers on the new york stock exchange , on concerns whether financial deals made by north america ' s largest buyer and seller of electricity and natural gas could negatively affect earnings going ahead .
shares were trading down 20 . 87 percent , or $ 4 . 13 , to $ 15 . 66 in midday trade , capping over a 75 percent decline this year in share price . as of tuesday , the company has lost more than $ 10 billion in value in the past week .
some analysts cut ratings or expressed concerns about the former high flyer ' s lack of forthrightness in discussing business deals , unimpressed by management ' s attempts on tuesday to pacify investor concerns about transactions involving enron , its chief financial officer , and two limited partnerships - all of which are being looked into by the securities and exchange commission ( sec ) .
enron on tuesday rejected suggestions the transactions were a conflict of interest , saying the deals were disclosed in sec filings and approved by its board and internal and external auditors .
enron , which reported a loss and a $ 1 . 01 billion in charges for bad investments in the third - quarter , failed to mention a $ 1 . 2 billion reduction in shareholder value , and was less than forthcoming during a call with analysts and investors the next day .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : research alert - enron stock drops on ' sell ' rating .
10 / 24 / 2001
reuters english news service
( c ) reuters limited 2001 .
new york , oct 24 ( reuters ) - enron corp . ' s stock slumped further on wednesday after prudential securities cut its rating on the energy trader to " sell " on concern management is not being forthright about the onetime high flyer .
after an hour of trading , enron stock was the biggest percentage loser on the new york stock exchange . the shares plunged $ 3 . 99 , or 20 . 2 percent , to $ 15 . 80 - the lowest price paid for the stock since august 1995 .
enron has tumbled since last week it announced it ' s first quarterly loss in more than four years and said it would take $ 1 . 01 billion in charges on ill - fated investments . the stock closed at $ 33 . 84 on oct . 16 , when its results were announced .
prudential analyst carol coale said the rating cut from " hold " was not made " because of things that we know but because of things that we potentially don ' t know about the company . "
copyright ? 2000 dow jones & company , inc . all rights reserved .
business
analyst reports on enron
christine romans , barry hyman
10 / 24 / 2001
cnnfn : market coverage - morning
( c ) copyright federal document clearing house . all rights reserved .
christine romans , cnnfn anchor , market call : now , joining us by phone to talk about his move on enron ( url : http : / / . www . enron . com / ) is anatol feygin , energy analyst at jp morgan . thank you for joining us .
anatol feygin , jp morgan : thanks for having me .
romans : ok . enron , last week , these shares lost some 28 or 29 percent of their value , continued to fall yesterday , and monday . what ` s going on here why you ` re downgrade - how concerned are you about in visibility management in the issues that we ` re talking about here ?
feygin : well , extremely concerned and until thursday of last week , i felt that a lot the information coming out was old news and was not critical to the fundamentals of the company . on friday of last week the credit market started to really get jittery and spreads on enron ` s credit started to blow out and that could threaten the fundamental business . yesterday management had a opportunity to set the record straight on a conference call . i think that was a big opportunity missed . and until management comes out and reassures the credit markets , primarily , and then the equities markets , there is risk to the fundamental business which i still consider to be the premiere energy marketing and trading franchise that ` s functioning well today , but it at risk because of credit issues .
barry hyman , ehrenkrantz king nussbaum : anatol , what exactly are these off balance sheets financing vehicle , that is of concern here , that management been reluctant to talk about ?
feygin : there are two transaction still left . one called marlin and one called white wing or osprey . in marlin , it ` s basically a 1 / 3 ownership of a u . k water utility that enron acquired in the october of ` 98 . part of that taken public and ` 99 . that was bought back in by enron this year . and problem is that entity , the assets of zurichs , which has this wessex water business in the u . k . , are not enough to payoff the creditors in marlin . so , enron is on the hook for a portion of the equity that has back stopped this investment by marlin . and we estimate that to be in the hundreds of millions not in the billion dollar range , which i think the market fears .
white wing is a very similar structure , less transparent because that ` s a collection of assets . things like , roughly half of enron ` s investment in brazil , its european power plants and et cetera and it ` s difficult to reconcile of what value of those asset is . and there is a possibly that enron have issue up to 2 . 4 billion in equity to make whole the investors in white wing .
romans : ok , anatol feygin , jp morgan , thank you very much . lots of other analysts saying that the conference call with the company didn ` t really clear up some of the questions they had .
copyright ? 2000 dow jones france telecom was unchanged from tuesday at 180 / 195 bps , and deutsche telecom was down about 10 bps at 140 / 150 bps , traders added . vodafone was quoted two basis points lower from late tuesday at 83 / 93 bps , with telefonica put at 100 / 110 bps in five - year default swaps , about five basis points lower .
stronger equity prices helped alleviate some concerns about the telecom sector ' s financial health , although problems remain for many firms labouring under heavy debt burdens , a dealer for a european bank said .
he added that some default swap selling pressure was coming from players arranging synthetic portfolio products such as collateralised debt obligations ( cdos ) before the end of the year . cdos are portfolios of bonds and other debt obligations . the arranger issues bonds , secured by the underlying assets to fund the deal . in a synthetic cdo , the arranger sells default swaps on groups of debt in one hit to mimic the asset pool .
elsewhere , dealers saw small declines in protection costs on the debt of carmakers , with u . s . - german giant daimlerchrysler trading several times .
a u . s . bank dealer nonethless saw it little changed on the day in five - year default swaps at 190 / 200 bps .
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron may need several hundred mln usd to meet shortfalls at investment units
10 / 24 / 2001
afx news
( c ) 2001 by afp - extel news ltd
london ( afx ) - enron corp might have to come up with several hundred million dollars or more in the next 20 months to cover potential shortfalls in investment vehicles it created , the wall street journal reported , citing an interview with enron treasurer ben glisan .
covering such shortfalls could involve issuing additional enron shares , diluting the position of current shareholders , the paper said .
however , glisan said the company believes it can repay about 3 . 3 bln usd in notes that were sold by those investment vehicles without having to resort to issuing more stock .
the notes were sold to investors during recent years by several entities - - known as the marlin water trust ii , the marlin water capital corp ii , the osprey trust and osprey i inc . the notes are coming due during the next 20 months .
glisan said assets from the entities could be sold to pay off some of the notes . also , enron is selling other assets . proceeds from those transactions also could go toward repaying the notes , which ultimately are guaranteed by enron .
he said it appears that asset sales will raise at least 2 . 2 bln usd by the end of next year . this amount includes cash proceeds of 1 . 55 bln usd from the previously announced sale of enron ' s portland general electric utility unit .
" there are a number of other assets we believe will raise sufficient proceeds " to repay the notes , glisan was quoted as saying . " but if we are wrong , we will issue equity . "
glisan said a worst - case scenario would involve issuing as much as 1 bln usd in stock . enron said it has about 850 mln shares outstanding .
making up any shortfall with equity has become more expensive because of the drop in enron ' s share price . during the past week , shares of the energy - trading giant have dropped more than 40 pct .
shw / jlw for more information and to contact afx : www . afxnews . com and www . afxpress . com
copyright ? 2000 dow jones anything more than 9 % is considered ultra - high risk . so while you can make 11 % , that ' s still not enough " where the accounting is questionable , " one bond trader says . " you ' re not being adequately compensated for the fact that the company could default . you have to worry about your recovery value . "
not the kind of risk / reward an investor wants to see when the company in question still has a market cap of about $ 12 . 5 billion with a capital b .
speaking of bonds and stocks : even with its stock at about $ 1 . 16 , global crossing ( gx : nyse - news - commentary ) still has a market cap that exceeds $ 1 billion . but while its stock has rallied , its bank debt has stayed relatively flat at around 50 cents to 53 cents on the dollar . similar stories can be told for xo communications ( xoxo : nasdaq - news - commentary ) , with a market cap of about $ 473 million and bank debt trading at around 52 cents on the dollar ; level 3 communications ( lvlt : nasdaq - news - commentary ) , with a market cap of $ 1 . 2 billion and bank debt trading at 66 cents ; and mcleodusa ( mcld : nasdaq - news - commentary ) , with a market cap of $ 462 million and debt that trades at 53 cents .
where are opportunistic bond investors , who should be hopping on such cheap debt - - especially bank debt , which is at the top of the getting - paid - back food chain ? they ' re nowhere to be seen , for the same reasons they ' re not jumping to buy enron ' s bonds : too much risk , because when companies like those go bad , their assets trade for less than the bonds are currently trading . ( try telling that to " hope - springs - eternal " stock investors ! )
providian pratfalls : turns out an item here back in may was more fortuitous than it appeared . the item noted how institutional bond investors , who often pony up a slight premium to libor to buy so - called credit default - protection insurance , couldn ' t find any at any price for providian ( pvn : nyse - news - commentary ) . the insurance is sold by investment banks such as j . p . morgan chase and typically involves a complex hedge of stocks and options that requires an investor to take the other side of the trade . if nobody ' ll take the other side of the trade - - or will charge a ridiculously high price to do so - - investors should beware . which brings us back to enron : it is possible to buy credit insurance , but at more than a whopping 1 , 000 basis points over libor . hardly a vote of confidence .
waiting for the other shoe to drop on enron
by james j . cramer >
realmoney . com
10 / 24 / 2001 10 : 33 am edt
url : >
accounting irregularities = sell . those three words and an equals sign have always served me well . they remain squarely posted on the base of my quote machine , always in view . they have never let me down . when i have deviated from them i have had to pay severely , as i did when i ignored the accounting irregularities in cendant ( cd : nyse - news - commentary ) initially or when , because of my four - month holding period , i couldn ' t sell qwest ( q : nyse - news - commentary ) .
which is why i came in with guns blazing on this enron ( ene : nyse - news - commentary ) , telling you to sell it . the stock has now lost half its value and all i can say is , i still can ' t see why you have to tempt fate and own this one . the notion that the businesses are fundamentally sound , that it has a great core business , is just hokum . who the heck knows ? who has any idea of what this company can really earn ? who knows what it did earn ?
all i know is that soon the drumbeat will be on from the democrats that the justice department is playing political favorites by not pursuing enron ( noted republican - giving company ) for alleged fraud .
when that happens , when that shoe drops , wherever enron is , then maybe it is worth some scrutiny .
but i bet i still won ' t like it .
enron ' s excuses sound familiar
by james j . cramer >
realmoney . com
10 / 23 / 2001 01 : 43 pm edt
url : >
if you disclose something that is wrong , and you get accountants to check off that wrong deed , and outside lawyers to check off on that wrong deed , is it therefore right ?
that ' s what enron ( ene : nyse - news - commentary ) is asking us to believe . by telling us that its ridiculous dealings with the chief financial officer and his private partnership were all sanctioned by outside professionals , they have simply compounded the error . next they will tell us that janus , the largest shareholder , knew and wanted those partnerships to generate upside surprises !
what they are doing at enron is , well , positively - - here we go - - ' 80 s ! in the ' 80 s , you had all of these savings - and - loan jokers pleading that the outside accountants and lawyers checked off on massive chicanery . somehow it was supposed to make the chicanery kosher .
nope .
what it ended up doing was getting the lawyers and accountants in trouble . the government ended up going after them , too , for abetting the travesties .
enron didn ' t use taxpayers ' money , so it is arguably not as clear - cut . but the more we probe this enron , the more we check it out , the more we know it really stinks and that jeffrey skilling didn ' t leave because the stock got hammered , or some other authentic wall street gibberish , but because of this nasty , unseemly situation .
we don ' t want an sec probe here . we want a justice department probe . this isn ' t about unclear disclosure . this could end up being about fraud .
in the meantime , i wouldn ' t touch this stock with a 10 - foot pole . this one ' s gonna get real nasty before it gets nice . if it ever does .
fool on the hill
enron ' s disdain for investors
the motley fool . com
10 / 24 / 01
while recent coverage of enron centers on the cfo ' s past partnerships , a smaller - - and more obvious - - omission is what should really make individual investors turn the heat up on this company . not only does it not release its cash flow statement during each quarter ' s conference call and press release , something we don ' t like but is prevalent , it also doesn ' t release its balance sheet . the company must think we ' re idiots . they ' re wrong .
by tom jacobs > ( tmf tom 9 )
october 24 , 2001
enron ' s ( nyse : ene ) > troubles just don ' t stop . on monday , the company announced > that the securities and exchange commission ( sec ) had requested information on " certain related party transactions > . " that was a veiled reference to partnerships until recently organized and directed by enron cfo andrew fastow . there has been a flurry - - a hailstorm - - of financial media attention to this . there are only three possibilities , and none is palatable :
the company ' s board allowed this deal in order to - - using corporate speak - - " incentivize " the cfo , and it was not legal ;
it was legal , but unethical ; or
enron has been less than forthcoming , perpetuating a pattern of disdain for investors and keeping them in the dark .
the accounting machinations involve mind - numbing terms and obfuscation , making a simple explanation of what is being alleged above my capacity to provide . the new york times ' floyd norris calls them " some of the most opaque transactions with insiders ever seen . " that leads me to one conclusion when i think about burying myself with the company ' s sec filings , accounting texts , my high - speed web connection , and some beer : that of shakespeare ' s king lear - - " that way madness lies . "
on the one hand , i know that pulling all this apart might teach me useful things about accounting , reading financial statements , and finding trouble . ( to read what this is all about , check the " certain transactions " section of the company ' s latest proxy statement > . ) i fully intend to do that - - someday . for now , though , all i need to know about enron as an investment is that the company has not made these issues transparent .
what ' s worse , though , is that enron has made it a habit to keep investors in the dark , and not only about the potentially troublesome cfo issue . the company goes out of its way to hide its true financials . that really cheeses me off .
the quarterly call and press release parade
most companies hold quarterly conference calls and simultaneously spew press releases ( for which the companies pay good money to business wire and pr newswire for dissemination ) that allegedly state their latest quarter ' s numbers and talk about the business . sometimes , when they have cleaned off their glasses enough for visibility and run it by their lawyers , execs will even venture to speak about the business climate ahead . at least thanks to regulation fair disclosure > - - " reg . fd " - - analysts don ' t get a secret call with the " real " numbers at another time than the public . we like that .
perhaps in a world of pro forma numbers > and ebitda > - - both of which phil weiss has skewered appropriately in past columns - - the calls and press releases could never be expected to be that substantive . that makes individual investors increasingly correct to greet such information with cries of " bullfeathers ! " it only takes a few reviews of earnings press releases to make anyone a skeptic . the pr department carefully dresses them with spin , leaving the details for the fine print . headline : " earnings up ! " ( revenues down 40 % . ) headline : " revenues up ! " ( earnings down 40 % . ) the skullduggery of spin and pro forma mangles earnings to meaninglessness > .
at least the conference calls themselves allow you a sense of managers as people and potentially some information about the business , but the financials are not helpful . why ?
hiding the cash flow statement
because almost every company gives up only part of the financial picture at call and press release time . if the income statement is increasingly unhelpful , at least the balance sheet tells you whether the company has increased or decreased cash , right ? well , not quite .
you really need the cash flow statement - - the best measure of how the company ' s business actually performs . even then , you may need to make further adjustments > . yet the overwhelming majority of companies do not provide the cash flow statement at the call and press release time .
check the companies you own . if they don ' t release cash flow statements with their earnings - - or , at least , prior to sec filings , you should write and otherwise hound investor relations to push management to do so . encourage your fellow investors to do so too , and tell the company that the motley fool sent ya . they will maintain that the numbers aren ' t ready at earnings time . tell them to wait until they are . the numbers are certainly ready in time for the sec deadline , and wouldn ' t we be happy to wait a week or two for the complete picture ? or , hey , why not do two releases - - one when the earnings are ready and another for the cash flow ?
if not releasing the cash flow statement were enron ' s only sin , it wouldn ' t be that big a deal . it has plenty of company . but this pre - halloween > scary tale gets worse . unfortunately for enron investors , the company does the hide - the - cash - flow - statement gig one better .
hiding the balance sheet
for at least the last three quarters that i checked , enron hides the balance sheet until sec filing time . that ' s right : not just the cash flow statement , but the balance sheet too . all they release is the income statement - - though , in truth , it does provide pages of income statement information for its many businesses . but why fail to release the balance sheet ?
the only conclusion can be that management doesn ' t want to show its cash balances until it can slip them into sec filings it thinks people won ' t bother to read . when questioners on a conference call earlier this year urged former enron ceo jeffrey skilling to provide a balance sheet at earnings release , skilling reportedly " called the questioner a common vulgarity that surprised many listeners . "
off his meds that day ? or a symptom of the company ' s attitude towards shareholders ? looks like the latter : skilling ' s gone , but the practice hasn ' t changed .
it ' s about management
we don ' t depend on management for the numbers during the quarterly public calls and releases . a publicly traded company ' s financials will appear a few weeks later through its sec filings available through our quotes & data page > . no investor should be buying - - or holding - - stock in companies if they don ' t read their filings carefully . it ' s hard enough to discern what ' s going on in a business without doing so , and even in those filings - - such as with options grants to management - - the real meat is buried in footnotes . not reading 10 - qs and 10 - ks is like getting married without dating , or buying a car by paint color only .
what enron ' s failure to release this information says is that its management and corporate governance are sub - par . it says management is willing to hold these events , but it ' ll be darned if it ' ll present anything meaningful or make it easy for individual investors to find out anything other than management ' s spin . in enron ' s case , its former ceo heaped abuse on someone who dared ask for a change . does that make enron ' s earnings releases circuses ? draw your own conclusion .
is management listening ? perhaps . it hastily pulled together a conference call yesterday . tmf community member emschulze took notes > :
" on call , analyst asks why no balance sheet with recent earnings release given company ' s previous claim that it will work to offer investors greater transparency in measuring its performance . . . response was that balance sheet doesn ' t normally come together until the week after its earnings release and that it will be included in 10 - q to be filed by nov . 14 . . . ceo indicates that it will do a better job of improving timing of release of earnings and balance sheet in future , implying that investors won ' t have to wait all the way until 10 - q filing deadlines to see balance sheet . "
that ' s a good sign . but until the company makes an unambiguous commitment to provide the balance sheet at earnings time , enron should be in the doghouse .
good corporate governance means companies release all their quarterly financial statements and discuss them at the same time because today ' s income statements and pro forma numbers are borderline useless . if it means a delay or a second release to get the numbers together , what ' s the problem ? shareholders should demand no less . when a company trumpets an income statement , as enron has , no one should be surprised when smoke appears . and perhaps much more .
tom jacobs ( tmf tom 9 ) would like to improve his own cash flow statement . at press time , he owned no shares of enron . to see his stock holdings , view his profile > , and check out the motley fool ' s disclosure policy . >
bonds of troubled enron quoted in dollars , not spreads
by michael c . barr
10 / 24 / 2001
capital markets report
( copyright ( c ) 2001 , dow jones & company , inc . )
of dowjones newswires
new york - ( dow jones ) - the bonds of embattled enron corp . ( ene ) are trading on a dollar basis and not on a yield margin or spread to treasurys - another sign of increasing investor skittishness about the once high flying energy trader .
the bonds , which carry investment - grade ratings , " started trading with a dollar price two days ago , " said gary brown , managing director and head of corporate trading , wachovia securities , charlotte , n . c .
bonds are being offered at dollar prices in the high 80 ' s to low 90 ' s , say traders .
investment grade bonds typically trade on a spread margin over comparable treasury issues . " credit bonds , " which have questions about their quality , are traded in dollar quotes , said one analyst .
moody ' s investors service rates the company ' s senior unsecured debt baal , but recently placed the debt on review for downgrade . both standard & poor ' s corp . and fitch rate the debt triple - b - plus .
but the company " may be going into the double - b ( non - investment grade ) sector , " said harold rivkin , principal of h . rivkin 201 - 938 - 2008 ; michael . barr @ dowjones . com
( david feldheim contributed to this article . )
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : group to put corporate directors under microscope .
by kevin drawbaugh
10 / 24 / 2001
reuters english news service
( c ) reuters limited 2001 .
washington , oct 24 ( reuters ) - directors of corporations will be graded according to their performance by a service expected to be launched soon by business research group the corporate library , the group ' s cofounder said on wednesday .
in a move that could cause some sweaty palms in boardrooms across the country , long - time shareholder activist nell minow said directors will be awarded grades of a , b , c and lower , based on meeting attendance and other benchmarks .
" it ' s always been my dream to rate individual directors like bonds . directors have not had the scrutiny they deserve , " said minow , who said the service will be called board analyst .
planned as an added feature on an existing web site , . com , board analyst is still in testing stages but is expected to launch next year , she said .
only directors of u . s . companies will initially be evaluated . non - u . s . directors may be added later .
minow and partner robert monks have written several books on corporate governance and shareholder rights . they formerly managed the washington - based shareholder activist lens fund , which they sold last year to british fund management group hermes .
their latest venture may find a receptive audience on the institutional buy - side , said industry spokespersons .
" there ' s been growing interest within our membership in board membership , in general , and individual directors , in particular . i definitely think there would be interest in more information on individual directors , " said ann yerger , spokeswoman for the council of institutional investors , which represents america ' s large pension funds .
the corporate governance movement since its beginnings in the 1970 s has focused on making directors more accountable and responsible . many companies have responded by requiring more outside directors and more meaningful stock ownership among directors . but examples of lax board oversight still abound .
one example would be enron corp . , whose stock has plunged in recent days since the company said the securities and exchange commission was investigating transactions involving certain outside partnerships and the company ' s chief financial officer , minow said .
" where was the enron board in all of this ? " she asked . " boards and outside consultants are supposed to vet ideas for partnerships like these . that apparently didn ' t happen here . "
taking the corporate governance argument a step further , minow argued that effective board membership is more than a theoretical question . it should be an issue for investors to evaluate when they consider buying stock in a company .
" this isn ' t just a corporate governance thing . this is part of investment analysis , " she said .
institutional investors routinely examine corporate management when analyzing stocks . whether they will begin to examine directors , as well , remained an open question .
" nell and bob monks have been shareholder activists for a long time and have moved corporate governance in a positive direction , " said peter gleason , vice president of research and development at the national association of corporate directors , which represents more than 3 , 000 corporate directors .
surveys by the association recently showed that corporate directors rank self - evaluation high on their list of concerns . " more and more directors are saying this is something we should be doing , " gleason said .
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron mentions
enron replaces andrew fastow as cfo amid sec inquiry ( updatel )
bloomberg - 10 / 24 / 01
enron shares drop for sixth day on stock downgrades ( update 5 )
bloomberg - 10 / 24 / 01
enron , fincl chief - 2 : mcmahon replaces andrew fastow
dow jones news service - 10 / 24 / 01
stockwatch enron falls 20 pct on worries deals with ljm will impact earnings
afx news - 10 / 24 / 01
usa : enron shares take midday battering , off over 20 pct .
reuters english news service - 10 / 24 / 01
usa : research alert - enron stock drops on ' sell ' rating .
reuters english news service - 10 / 24 / 01
analyst reports on enron
cnnfn : market coverage - 10 / 24 / 01
uk : credit costs surge on embattled enron - telcos ease .
reuters english news service - 10 / 24 / 01
enron may need several hundred mln usd to meet shortfalls at investment units
afx news - 10 / 24 / 01
enron shares plummet again
drop comes on heels of five straight losing sessions
cbs marketwatch . com - 10 / 24 / 01
enron ' s bonds tell the tale : stay away
realmoney . com - 10 / 24 / 01
waiting for the other shoe to drop on enron
realmoney . com - 10 / 24 / 01
enron ' s excuses sound familiar
realmoney . com - 10 / 24 / 01
fool on the hill
enron ' s disdain for investors
the motley fool . com - 10 / 24 / 01
bonds of troubled enron quoted in dollars , not spreads
capital markets report - 10 / 24 / 01
usa : group to put corporate directors under microscope .
reuters english news service - 10 / 24 / 01
enron replaces andrew fastow as cfo amid sec inquiry ( updatel )
2001 - 10 - 24 16 : 43 ( new york )
enron replaces andrew fastow as cfo amid sec inquiry ( updatel )
( adds statement from enron ' s kenneth lay in second
paragraph . )
houston , oct . 24 ( bloomberg ) - - enron corp . ousted chief
financial officer andrew fastow amid a securities and exchange
commission inquiry into partnerships he ran that cost the largest
energy trader $ 35 million .
enron named jeff mcmahon , head of its industrial markets
group , as cfo because ` ` it became clear to me that restoring
investor confidence would require us to replace andy , ' ' chairman
and chief executive officer kenneth lay said in a statement .
fastow will take a leave of absence .
shares of enron , based in houston , fell as much as 22 percent
today after analysts downgraded the stock . the company said on
monday that the sec had begun an inquiry into partnerships fastow
ran .
enron fell $ 3 . 38 , or 17 percent , to $ 16 . 41 , the sixth
straight day of decline . earlier , the shares touched $ 15 . 51 , their
lowest since february 1995 . the stock plunged 21 percent on
monday , after enron disclosed that the sec had requested
information on the partnerships .
the stock fell after lay failed to ease concerns about the
sec inquiry or enron ' s financial reporting in a conference call
yesterday . investors have criticized lay for not disclosing enough
about the workings of investment vehicles such as fastow ' s
partnerships . the stock has fallen 57 percent since oct . 11 ,
losing more than $ 15 billion in market value .
enron shares drop for sixth day on stock downgrades ( update 5 )
2001 - 10 - 24 16 : 43 ( new york )
enron shares drop for sixth day on stock downgrades ( update 5 )
( updates with closing share price and fastow on leave of
absence in second paragraph . )
houston , oct . 24 ( bloomberg ) - - shares of enron corp . fell 17
percent after several analysts downgraded the stock and the u . s .
securities and exchange commission began an inquiry into
partnerships run by chief financial officer andrew fastow .
enron fell $ 3 . 38 to $ 17 . 08 , dropping for the sixth day in a
row . it was the biggest percentage decline among stocks in the
standard & poor ' s 500 index . earlier , the stock touched $ 15 . 51 ,
the lowest since february 1995 . after the close of regular u . s .
trading , enron said fastow will take a leave of absence , and jeff
mcmahon was named chief financial officer .
chief executive officer kenneth lay failed to ease concerns
about the sec inquiry or enron ' s financial reporting in a
conference call yesterday . investors have criticized lay for not
revealing enough about the workings of investment vehicles such as
fastow ' s partnerships . the stock has fallen 57 percent since oct .
11 , losing more than $ 15 billion in market value .
` ` enron ' s conference call began as a methodical review of
current liquidity and deteriorated into an inadequate defense of
the balance sheet , ' ' lehman brothers analyst richard gross wrote
in a report . he left his ` ` strong buy ' ' rating unchanged .
other analysts lowered their ratings , including carol coale
at prudential securities who downgraded enron to ` ` sell ' ' from
` ` hold . ' ' anatol feygin of j . p . morgan dropped his rating to long -
term ` ` buy ' ' from ` ` buy . ' ' first albany corp . ' s robert christensen
downgraded the stock to ` ` buy ' ' from ` ` strong buy . ' '
possible downgrade
moody ' s investors service last week placed all $ 13 billion of
the company ' s long - term debt securities on watch for possible
downgrade . a reduction in the rating could cut houston - based enron
off from the commercial paper market , raising the costs of short -
term debt .
enron said earlier this month that dealings with the fastow
partnerships contributed to $ 1 . 01 billion in third - quarter losses .
enron has at least 18 such partnerships , which were created to
move debt off its books and lower its tax liabilities as well as
dispose of assets .
an investor has sued enron saying that fastow ' s leadership of
the partnerships , as well as membership on their boards by other
enron executives , is a conflict of interest . the company has $ 3 . 3
billion in potential liabilities attached to such investment
vehicles , the wall street journal reported today .
` ` i don ' t know that we were aware of everything going on with
enron , ' ' said jim walline , manager of the lutheran brotherhood
fund , which owned 93 , 060 shares on sept . 1 . ` ` we had a lot of
confidence and clearly that has been busted a little . ' '
enron , fincl chief - 2 : mcmahon replaces andrew fastow
10 / 24 / 2001
dow jones news service
( copyright ( c ) 2001 , dow jones dow jones newswires ; 201 - 938 - 5400
stockwatch enron falls 20 pct on worries deals with ljm will impact earnings
10 / 24 / 2001
afx news
( c ) 2001 by afp - extel news ltd
new york ( afx ) - shares of enron corp were sharply lower in afternoon trade , falling over 20 pct , as investors sold the stock a third day running on concerns that financial transactions made with related party ljm could negatively impact future earnings , dealers said .
at 2 . 15 pm , enron was down 4 . 06 usd , or 20 . 52 pct , at 15 . 73 .
the djia was up 9 . 76 points at 9 , 349 . 77 , and the s & p 500 composite index was up 0 . 92 at 1 , 085 . 70 , while the nasdaq composite fell 22 . 42 to 1 , 726 . 96 .
the company confirmed yesterday that the securities and exchange commission requested the company to provide information on certain related - party transactions .
many analysts responded by cutting the shares ratings on concerns that dealings with the related ljm partnership could affect future earnings , after two class actions were filed against the company yesterday .
the two lawsuits claim that enron issued statements which failed to disclose that the company was experiencing a declining demand for bandwidth and that its efforts to create a trading market for bandwidth failed because many market participants were not credit worthy .
the company ' s operating results were also " materially overstated as result of the company failure to timely write down the value of its investments with certain limited partnerships " managed by the company ' s cfo .
the suit additionally alleged that enron failed to write down impaired assets on a timely basis in accordance with gaap ( generally accepted accounting principles ) .
in its third - quarter results last week , enron announced a charge of 1 . 01 bln usd , or 1 . 11 usd per share , and an incremental 1 . 2 bln usd reduction in stockholders ' equity , related to the unwinding of investments with the ljm partnerships .
jp morgan analyst anatol feygin said he has downgraded the stock to a ' long - term buy ' from a ' buy ' in " the wake of lingering concerns regarding the company ' s credit situation and management disclosure of liabilities stemming from off - balance sheet financing vehicles . "
the stock has been removed from jp morgan ' s " focus list " .
feygin also said that " management ' s conference call yesterday morning was a missed opportunity to disclose the necessary information to assuage investor concerns . "
goldman sachs analyst , david fleischer also agreed that enron ' s disclosure was " modest " and " management did not resolve concerns . "
however , credit concerns and questions about potential liabilities are " very much exaggerated , " he said
" the real issue will turn out to be huge debt that enron was placing in these entities . "
the shares ' value have fallen by more than 40 pct since enron reported charges related to investments with ljm last week , but fleischer said he sees no recovery until management fully answers investor questions and restores credibility , an outcome he expects in future weeks .
blms / gc for more information and to contact afx : www . afxnews . com and www . afxpress . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : enron shares take midday battering , off over 20 pct .
by janet mcgurty
10 / 24 / 2001
reuters english news service
( c ) reuters limited 2001 .
new york , oct 24 ( reuters ) - shares of enron corp . plunged further in midday trade on wednesday , hugging the top spot on the list of biggest losers on the new york stock exchange , on concerns whether financial deals made by north america ' s largest buyer and seller of electricity and natural gas could negatively affect earnings going ahead .
shares were trading down 20 . 87 percent , or $ 4 . 13 , to $ 15 . 66 in midday trade , capping over a 75 percent decline this year in share price . as of tuesday , the company has lost more than $ 10 billion in value in the past week .
some analysts cut ratings or expressed concerns about the former high flyer ' s lack of forthrightness in discussing business deals , unimpressed by management ' s attempts on tuesday to pacify investor concerns about transactions involving enron , its chief financial officer , and two limited partnerships - all of which are being looked into by the securities and exchange commission ( sec ) .
enron on tuesday rejected suggestions the transactions were a conflict of interest , saying the deals were disclosed in sec filings and approved by its board and internal and external auditors .
enron , which reported a loss and a $ 1 . 01 billion in charges for bad investments in the third - quarter , failed to mention a $ 1 . 2 billion reduction in shareholder value , and was less than forthcoming during a call with analysts and investors the next day .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : research alert - enron stock drops on ' sell ' rating .
10 / 24 / 2001
reuters english news service
( c ) reuters limited 2001 .
new york , oct 24 ( reuters ) - enron corp . ' s stock slumped further on wednesday after prudential securities cut its rating on the energy trader to " sell " on concern management is not being forthright about the onetime high flyer .
after an hour of trading , enron stock was the biggest percentage loser on the new york stock exchange . the shares plunged $ 3 . 99 , or 20 . 2 percent , to $ 15 . 80 - the lowest price paid for the stock since august 1995 .
enron has tumbled since last week it announced it ' s first quarterly loss in more than four years and said it would take $ 1 . 01 billion in charges on ill - fated investments . the stock closed at $ 33 . 84 on oct . 16 , when its results were announced .
prudential analyst carol coale said the rating cut from " hold " was not made " because of things that we know but because of things that we potentially don ' t know about the company . "
copyright ? 2000 dow jones & company , inc . all rights reserved .
business
analyst reports on enron
christine romans , barry hyman
10 / 24 / 2001
cnnfn : market coverage - morning
( c ) copyright federal document clearing house . all rights reserved .
christine romans , cnnfn anchor , market call : now , joining us by phone to talk about his move on enron ( url : http : / / . www . enron . com / ) is anatol feygin , energy analyst at jp morgan . thank you for joining us .
anatol feygin , jp morgan : thanks for having me .
romans : ok . enron , last week , these shares lost some 28 or 29 percent of their value , continued to fall yesterday , and monday . what ` s going on here why you ` re downgrade - how concerned are you about in visibility management in the issues that we ` re talking about here ?
feygin : well , extremely concerned and until thursday of last week , i felt that a lot the information coming out was old news and was not critical to the fundamentals of the company . on friday of last week the credit market started to really get jittery and spreads on enron ` s credit started to blow out and that could threaten the fundamental business . yesterday management had a opportunity to set the record straight on a conference call . i think that was a big opportunity missed . and until management comes out and reassures the credit markets , primarily , and then the equities markets , there is risk to the fundamental business which i still consider to be the premiere energy marketing and trading franchise that ` s functioning well today , but it at risk because of credit issues .
barry hyman , ehrenkrantz king nussbaum : anatol , what exactly are these off balance sheets financing vehicle , that is of concern here , that management been reluctant to talk about ?
feygin : there are two transaction still left . one called marlin and one called white wing or osprey . in marlin , it ` s basically a 1 / 3 ownership of a u . k water utility that enron acquired in the october of ` 98 . part of that taken public and ` 99 . that was bought back in by enron this year . and problem is that entity , the assets of zurichs , which has this wessex water business in the u . k . , are not enough to payoff the creditors in marlin . so , enron is on the hook for a portion of the equity that has back stopped this investment by marlin . and we estimate that to be in the hundreds of millions not in the billion dollar range , which i think the market fears .
white wing is a very similar structure , less transparent because that ` s a collection of assets . things like , roughly half of enron ` s investment in brazil , its european power plants and et cetera and it ` s difficult to reconcile of what value of those asset is . and there is a possibly that enron have issue up to 2 . 4 billion in equity to make whole the investors in white wing .
romans : ok , anatol feygin , jp morgan , thank you very much . lots of other analysts saying that the conference call with the company didn ` t really clear up some of the questions they had .
copyright ? 2000 dow jones france telecom was unchanged from tuesday at 180 / 195 bps , and deutsche telecom was down about 10 bps at 140 / 150 bps , traders added . vodafone was quoted two basis points lower from late tuesday at 83 / 93 bps , with telefonica put at 100 / 110 bps in five - year default swaps , about five basis points lower .
stronger equity prices helped alleviate some concerns about the telecom sector ' s financial health , although problems remain for many firms labouring under heavy debt burdens , a dealer for a european bank said .
he added that some default swap selling pressure was coming from players arranging synthetic portfolio products such as collateralised debt obligations ( cdos ) before the end of the year . cdos are portfolios of bonds and other debt obligations . the arranger issues bonds , secured by the underlying assets to fund the deal . in a synthetic cdo , the arranger sells default swaps on groups of debt in one hit to mimic the asset pool .
elsewhere , dealers saw small declines in protection costs on the debt of carmakers , with u . s . - german giant daimlerchrysler trading several times .
a u . s . bank dealer nonethless saw it little changed on the day in five - year default swaps at 190 / 200 bps .
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron may need several hundred mln usd to meet shortfalls at investment units
10 / 24 / 2001
afx news
( c ) 2001 by afp - extel news ltd
london ( afx ) - enron corp might have to come up with several hundred million dollars or more in the next 20 months to cover potential shortfalls in investment vehicles it created , the wall street journal reported , citing an interview with enron treasurer ben glisan .
covering such shortfalls could involve issuing additional enron shares , diluting the position of current shareholders , the paper said .
however , glisan said the company believes it can repay about 3 . 3 bln usd in notes that were sold by those investment vehicles without having to resort to issuing more stock .
the notes were sold to investors during recent years by several entities - - known as the marlin water trust ii , the marlin water capital corp ii , the osprey trust and osprey i inc . the notes are coming due during the next 20 months .
glisan said assets from the entities could be sold to pay off some of the notes . also , enron is selling other assets . proceeds from those transactions also could go toward repaying the notes , which ultimately are guaranteed by enron .
he said it appears that asset sales will raise at least 2 . 2 bln usd by the end of next year . this amount includes cash proceeds of 1 . 55 bln usd from the previously announced sale of enron ' s portland general electric utility unit .
" there are a number of other assets we believe will raise sufficient proceeds " to repay the notes , glisan was quoted as saying . " but if we are wrong , we will issue equity . "
glisan said a worst - case scenario would involve issuing as much as 1 bln usd in stock . enron said it has about 850 mln shares outstanding .
making up any shortfall with equity has become more expensive because of the drop in enron ' s share price . during the past week , shares of the energy - trading giant have dropped more than 40 pct .
shw / jlw for more information and to contact afx : www . afxnews . com and www . afxpress . com
copyright ? 2000 dow jones anything more than 9 % is considered ultra - high risk . so while you can make 11 % , that ' s still not enough " where the accounting is questionable , " one bond trader says . " you ' re not being adequately compensated for the fact that the company could default . you have to worry about your recovery value . "
not the kind of risk / reward an investor wants to see when the company in question still has a market cap of about $ 12 . 5 billion with a capital b .
speaking of bonds and stocks : even with its stock at about $ 1 . 16 , global crossing ( gx : nyse - news - commentary ) still has a market cap that exceeds $ 1 billion . but while its stock has rallied , its bank debt has stayed relatively flat at around 50 cents to 53 cents on the dollar . similar stories can be told for xo communications ( xoxo : nasdaq - news - commentary ) , with a market cap of about $ 473 million and bank debt trading at around 52 cents on the dollar ; level 3 communications ( lvlt : nasdaq - news - commentary ) , with a market cap of $ 1 . 2 billion and bank debt trading at 66 cents ; and mcleodusa ( mcld : nasdaq - news - commentary ) , with a market cap of $ 462 million and debt that trades at 53 cents .
where are opportunistic bond investors , who should be hopping on such cheap debt - - especially bank debt , which is at the top of the getting - paid - back food chain ? they ' re nowhere to be seen , for the same reasons they ' re not jumping to buy enron ' s bonds : too much risk , because when companies like those go bad , their assets trade for less than the bonds are currently trading . ( try telling that to " hope - springs - eternal " stock investors ! )
providian pratfalls : turns out an item here back in may was more fortuitous than it appeared . the item noted how institutional bond investors , who often pony up a slight premium to libor to buy so - called credit default - protection insurance , couldn ' t find any at any price for providian ( pvn : nyse - news - commentary ) . the insurance is sold by investment banks such as j . p . morgan chase and typically involves a complex hedge of stocks and options that requires an investor to take the other side of the trade . if nobody ' ll take the other side of the trade - - or will charge a ridiculously high price to do so - - investors should beware . which brings us back to enron : it is possible to buy credit insurance , but at more than a whopping 1 , 000 basis points over libor . hardly a vote of confidence .
waiting for the other shoe to drop on enron
by james j . cramer >
realmoney . com
10 / 24 / 2001 10 : 33 am edt
url : >
accounting irregularities = sell . those three words and an equals sign have always served me well . they remain squarely posted on the base of my quote machine , always in view . they have never let me down . when i have deviated from them i have had to pay severely , as i did when i ignored the accounting irregularities in cendant ( cd : nyse - news - commentary ) initially or when , because of my four - month holding period , i couldn ' t sell qwest ( q : nyse - news - commentary ) .
which is why i came in with guns blazing on this enron ( ene : nyse - news - commentary ) , telling you to sell it . the stock has now lost half its value and all i can say is , i still can ' t see why you have to tempt fate and own this one . the notion that the businesses are fundamentally sound , that it has a great core business , is just hokum . who the heck knows ? who has any idea of what this company can really earn ? who knows what it did earn ?
all i know is that soon the drumbeat will be on from the democrats that the justice department is playing political favorites by not pursuing enron ( noted republican - giving company ) for alleged fraud .
when that happens , when that shoe drops , wherever enron is , then maybe it is worth some scrutiny .
but i bet i still won ' t like it .
enron ' s excuses sound familiar
by james j . cramer >
realmoney . com
10 / 23 / 2001 01 : 43 pm edt
url : >
if you disclose something that is wrong , and you get accountants to check off that wrong deed , and outside lawyers to check off on that wrong deed , is it therefore right ?
that ' s what enron ( ene : nyse - news - commentary ) is asking us to believe . by telling us that its ridiculous dealings with the chief financial officer and his private partnership were all sanctioned by outside professionals , they have simply compounded the error . next they will tell us that janus , the largest shareholder , knew and wanted those partnerships to generate upside surprises !
what they are doing at enron is , well , positively - - here we go - - ' 80 s ! in the ' 80 s , you had all of these savings - and - loan jokers pleading that the outside accountants and lawyers checked off on massive chicanery . somehow it was supposed to make the chicanery kosher .
nope .
what it ended up doing was getting the lawyers and accountants in trouble . the government ended up going after them , too , for abetting the travesties .
enron didn ' t use taxpayers ' money , so it is arguably not as clear - cut . but the more we probe this enron , the more we check it out , the more we know it really stinks and that jeffrey skilling didn ' t leave because the stock got hammered , or some other authentic wall street gibberish , but because of this nasty , unseemly situation .
we don ' t want an sec probe here . we want a justice department probe . this isn ' t about unclear disclosure . this could end up being about fraud .
in the meantime , i wouldn ' t touch this stock with a 10 - foot pole . this one ' s gonna get real nasty before it gets nice . if it ever does .
fool on the hill
enron ' s disdain for investors
the motley fool . com
10 / 24 / 01
while recent coverage of enron centers on the cfo ' s past partnerships , a smaller - - and more obvious - - omission is what should really make individual investors turn the heat up on this company . not only does it not release its cash flow statement during each quarter ' s conference call and press release , something we don ' t like but is prevalent , it also doesn ' t release its balance sheet . the company must think we ' re idiots . they ' re wrong .
by tom jacobs > ( tmf tom 9 )
october 24 , 2001
enron ' s ( nyse : ene ) > troubles just don ' t stop . on monday , the company announced > that the securities and exchange commission ( sec ) had requested information on " certain related party transactions > . " that was a veiled reference to partnerships until recently organized and directed by enron cfo andrew fastow . there has been a flurry - - a hailstorm - - of financial media attention to this . there are only three possibilities , and none is palatable :
the company ' s board allowed this deal in order to - - using corporate speak - - " incentivize " the cfo , and it was not legal ;
it was legal , but unethical ; or
enron has been less than forthcoming , perpetuating a pattern of disdain for investors and keeping them in the dark .
the accounting machinations involve mind - numbing terms and obfuscation , making a simple explanation of what is being alleged above my capacity to provide . the new york times ' floyd norris calls them " some of the most opaque transactions with insiders ever seen . " that leads me to one conclusion when i think about burying myself with the company ' s sec filings , accounting texts , my high - speed web connection , and some beer : that of shakespeare ' s king lear - - " that way madness lies . "
on the one hand , i know that pulling all this apart might teach me useful things about accounting , reading financial statements , and finding trouble . ( to read what this is all about , check the " certain transactions " section of the company ' s latest proxy statement > . ) i fully intend to do that - - someday . for now , though , all i need to know about enron as an investment is that the company has not made these issues transparent .
what ' s worse , though , is that enron has made it a habit to keep investors in the dark , and not only about the potentially troublesome cfo issue . the company goes out of its way to hide its true financials . that really cheeses me off .
the quarterly call and press release parade
most companies hold quarterly conference calls and simultaneously spew press releases ( for which the companies pay good money to business wire and pr newswire for dissemination ) that allegedly state their latest quarter ' s numbers and talk about the business . sometimes , when they have cleaned off their glasses enough for visibility and run it by their lawyers , execs will even venture to speak about the business climate ahead . at least thanks to regulation fair disclosure > - - " reg . fd " - - analysts don ' t get a secret call with the " real " numbers at another time than the public . we like that .
perhaps in a world of pro forma numbers > and ebitda > - - both of which phil weiss has skewered appropriately in past columns - - the calls and press releases could never be expected to be that substantive . that makes individual investors increasingly correct to greet such information with cries of " bullfeathers ! " it only takes a few reviews of earnings press releases to make anyone a skeptic . the pr department carefully dresses them with spin , leaving the details for the fine print . headline : " earnings up ! " ( revenues down 40 % . ) headline : " revenues up ! " ( earnings down 40 % . ) the skullduggery of spin and pro forma mangles earnings to meaninglessness > .
at least the conference calls themselves allow you a sense of managers as people and potentially some information about the business , but the financials are not helpful . why ?
hiding the cash flow statement
because almost every company gives up only part of the financial picture at call and press release time . if the income statement is increasingly unhelpful , at least the balance sheet tells you whether the company has increased or decreased cash , right ? well , not quite .
you really need the cash flow statement - - the best measure of how the company ' s business actually performs . even then , you may need to make further adjustments > . yet the overwhelming majority of companies do not provide the cash flow statement at the call and press release time .
check the companies you own . if they don ' t release cash flow statements with their earnings - - or , at least , prior to sec filings , you should write and otherwise hound investor relations to push management to do so . encourage your fellow investors to do so too , and tell the company that the motley fool sent ya . they will maintain that the numbers aren ' t ready at earnings time . tell them to wait until they are . the numbers are certainly ready in time for the sec deadline , and wouldn ' t we be happy to wait a week or two for the complete picture ? or , hey , why not do two releases - - one when the earnings are ready and another for the cash flow ?
if not releasing the cash flow statement were enron ' s only sin , it wouldn ' t be that big a deal . it has plenty of company . but this pre - halloween > scary tale gets worse . unfortunately for enron investors , the company does the hide - the - cash - flow - statement gig one better .
hiding the balance sheet
for at least the last three quarters that i checked , enron hides the balance sheet until sec filing time . that ' s right : not just the cash flow statement , but the balance sheet too . all they release is the income statement - - though , in truth , it does provide pages of income statement information for its many businesses . but why fail to release the balance sheet ?
the only conclusion can be that management doesn ' t want to show its cash balances until it can slip them into sec filings it thinks people won ' t bother to read . when questioners on a conference call earlier this year urged former enron ceo jeffrey skilling to provide a balance sheet at earnings release , skilling reportedly " called the questioner a common vulgarity that surprised many listeners . "
off his meds that day ? or a symptom of the company ' s attitude towards shareholders ? looks like the latter : skilling ' s gone , but the practice hasn ' t changed .
it ' s about management
we don ' t depend on management for the numbers during the quarterly public calls and releases . a publicly traded company ' s financials will appear a few weeks later through its sec filings available through our quotes & data page > . no investor should be buying - - or holding - - stock in companies if they don ' t read their filings carefully . it ' s hard enough to discern what ' s going on in a business without doing so , and even in those filings - - such as with options grants to management - - the real meat is buried in footnotes . not reading 10 - qs and 10 - ks is like getting married without dating , or buying a car by paint color only .
what enron ' s failure to release this information says is that its management and corporate governance are sub - par . it says management is willing to hold these events , but it ' ll be darned if it ' ll present anything meaningful or make it easy for individual investors to find out anything other than management ' s spin . in enron ' s case , its former ceo heaped abuse on someone who dared ask for a change . does that make enron ' s earnings releases circuses ? draw your own conclusion .
is management listening ? perhaps . it hastily pulled together a conference call yesterday . tmf community member emschulze took notes > :
" on call , analyst asks why no balance sheet with recent earnings release given company ' s previous claim that it will work to offer investors greater transparency in measuring its performance . . . response was that balance sheet doesn ' t normally come together until the week after its earnings release and that it will be included in 10 - q to be filed by nov . 14 . . . ceo indicates that it will do a better job of improving timing of release of earnings and balance sheet in future , implying that investors won ' t have to wait all the way until 10 - q filing deadlines to see balance sheet . "
that ' s a good sign . but until the company makes an unambiguous commitment to provide the balance sheet at earnings time , enron should be in the doghouse .
good corporate governance means companies release all their quarterly financial statements and discuss them at the same time because today ' s income statements and pro forma numbers are borderline useless . if it means a delay or a second release to get the numbers together , what ' s the problem ? shareholders should demand no less . when a company trumpets an income statement , as enron has , no one should be surprised when smoke appears . and perhaps much more .
tom jacobs ( tmf tom 9 ) would like to improve his own cash flow statement . at press time , he owned no shares of enron . to see his stock holdings , view his profile > , and check out the motley fool ' s disclosure policy . >
bonds of troubled enron quoted in dollars , not spreads
by michael c . barr
10 / 24 / 2001
capital markets report
( copyright ( c ) 2001 , dow jones & company , inc . )
of dowjones newswires
new york - ( dow jones ) - the bonds of embattled enron corp . ( ene ) are trading on a dollar basis and not on a yield margin or spread to treasurys - another sign of increasing investor skittishness about the once high flying energy trader .
the bonds , which carry investment - grade ratings , " started trading with a dollar price two days ago , " said gary brown , managing director and head of corporate trading , wachovia securities , charlotte , n . c .
bonds are being offered at dollar prices in the high 80 ' s to low 90 ' s , say traders .
investment grade bonds typically trade on a spread margin over comparable treasury issues . " credit bonds , " which have questions about their quality , are traded in dollar quotes , said one analyst .
moody ' s investors service rates the company ' s senior unsecured debt baal , but recently placed the debt on review for downgrade . both standard & poor ' s corp . and fitch rate the debt triple - b - plus .
but the company " may be going into the double - b ( non - investment grade ) sector , " said harold rivkin , principal of h . rivkin 201 - 938 - 2008 ; michael . barr @ dowjones . com
( david feldheim contributed to this article . )
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : group to put corporate directors under microscope .
by kevin drawbaugh
10 / 24 / 2001
reuters english news service
( c ) reuters limited 2001 .
washington , oct 24 ( reuters ) - directors of corporations will be graded according to their performance by a service expected to be launched soon by business research group the corporate library , the group ' s cofounder said on wednesday .
in a move that could cause some sweaty palms in boardrooms across the country , long - time shareholder activist nell minow said directors will be awarded grades of a , b , c and lower , based on meeting attendance and other benchmarks .
" it ' s always been my dream to rate individual directors like bonds . directors have not had the scrutiny they deserve , " said minow , who said the service will be called board analyst .
planned as an added feature on an existing web site , . com , board analyst is still in testing stages but is expected to launch next year , she said .
only directors of u . s . companies will initially be evaluated . non - u . s . directors may be added later .
minow and partner robert monks have written several books on corporate governance and shareholder rights . they formerly managed the washington - based shareholder activist lens fund , which they sold last year to british fund management group hermes .
their latest venture may find a receptive audience on the institutional buy - side , said industry spokespersons .
" there ' s been growing interest within our membership in board membership , in general , and individual directors , in particular . i definitely think there would be interest in more information on individual directors , " said ann yerger , spokeswoman for the council of institutional investors , which represents america ' s large pension funds .
the corporate governance movement since its beginnings in the 1970 s has focused on making directors more accountable and responsible . many companies have responded by requiring more outside directors and more meaningful stock ownership among directors . but examples of lax board oversight still abound .
one example would be enron corp . , whose stock has plunged in recent days since the company said the securities and exchange commission was investigating transactions involving certain outside partnerships and the company ' s chief financial officer , minow said .
" where was the enron board in all of this ? " she asked . " boards and outside consultants are supposed to vet ideas for partnerships like these . that apparently didn ' t happen here . "
taking the corporate governance argument a step further , minow argued that effective board membership is more than a theoretical question . it should be an issue for investors to evaluate when they consider buying stock in a company .
" this isn ' t just a corporate governance thing . this is part of investment analysis , " she said .
institutional investors routinely examine corporate management when analyzing stocks . whether they will begin to examine directors , as well , remained an open question .
" nell and bob monks have been shareholder activists for a long time and have moved corporate governance in a positive direction , " said peter gleason , vice president of research and development at the national association of corporate directors , which represents more than 3 , 000 corporate directors .
surveys by the association recently showed that corporate directors rank self - evaluation high on their list of concerns . " more and more directors are saying this is something we should be doing , " gleason said .
copyright ? 2000 dow jones & company , inc . all rights reserved .