An important case study/ test case for the disciples of Finance/Business/Economics as well as psychology to learn from the rise and fall of business ventures. Business do not groom overnight. It requires a lot of potential, hard work, determination and dedication to achieve a position.
P.S. As a part of student learning series, this story is being publishing for your information and learning. The KeterOnline does not have any legal/moral evidence regarding truth or confidence about the story. All the below information is collected from libraries, books, internet and case studies. Hope you will enjoy the series.
Part 1/4
Early Years of
Enron
Enron was formed in July 1985 by Kenneth Lay, when
Texas-based Houston Natural Gas merged with InterNorth, a Nebraska-based
natural gas company. In its first few years, the new company was simply a
natural gas provider, but by 1989 it had begun trading natural gas commodities,
and in 1994 it began trading electricity.
Business of Enron
The company introduced a number of revolutionary changes to
energy trading, assisted by the changing nature of the energy markets, which
were being deregulated in the 1990s and thus opening the door for new power
traders and suppliers. Enron tailored electricity and natural gas contracts to
reflect the cost of delivery to a specific destination—creating in essence, for
the first time, a nationwide (and ultimately global) energy-trading network. In
1999 the company launched Enron Online, an Internet-based system, and by 2001
it was executing on-line trades worth about $2.5 billion a day.
Growth of Enron
In its early years, Enron became the largest seller of natural gas
in North America by 1992, its trading of gas contracts earned $122 million (before interest and taxes),
the second largest contributor to the company's net income. The November 1999
creation of the EnronOnline trading website allowed the company to
better manage its contracts trading business.
In an attempt to achieve further growth, Enron pursued a
diversification strategy. The company owned and operated a variety of assets
including gas pipelines, electricity plants, pulp and paper plants, water
plants, and broadband services across the globe. (Wikipedia)
Businesses of
Enron
According to the
source of Wilipedia, Investopedia, and New york Times, CNN, Enron was adopted a
diversified strategy in Business.
Major Business was Enron
traded in more than 30 different products, including the following:
·
Products
traded on EnronOnline
·
Petrochemicals
·
Plastics
·
Power
·
Pulp and
paper
·
Steel
·
Weather
Risk Management
·
Oil and
LNG transportation
·
Broadband
·
Principal
investments
·
Risk
management for commodities
·
Shipping
/ freight
·
Streaming
media
·
Water and
wastewater
It was also an extensive futures trader, including sugar,
coffee, grains, hogs, and other meat futures. At the time of its bankruptcy
filing during December 2001, Enron was structured into seven distinct business
units.
Rise of Stock
Enron's stock
increased from the start of the 1990s until year-end 1998 by 311%, only modestly
higher than the average rate of growth in the Standard & Poor 500
index. However, the stock increased by 56% in 1999 and a further 87% in 2000, compared
to a 20% increase and a 10% decrease for the index during the same years.
By December 31, 2000, Enron's stock was priced at $83.13 and its market capitalization exceeded $60 billion, 70
times earnings and
six times book value, an indication of the stock market's
high expectations about its future prospects. In addition, Enron was rated the
most innovative large company in America in Fortune's Most Admired Companies survey.
According To CNN (Enron shares were worth $90.75 at their peak in August 2000
and dropped to $0.67 in January 2002.)
By century’s end Enron had become one of the
most successful companies in the world, having posted a 57% increase in sales
between 1996 and 2000. At its peak the company controlled more than 25% of the
“over the counter” energy-trading market—that is, trades conducted
party-to-party rather than over an exchange, such as the New York Mercantile
Exchange. Enron shares hit a 52-week
high of $84.87 per share in the last week of 2000. STAY TUNED FOR OTHER PART OF THE SERIES. CHEERS!!
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