Enron Shares Drop to Nine-Year Low

Shares of Enron Corp. dropped 19 percent to their lowest level since 1992 on Tuesday, amid fears of a credit crunch and persistent investor concerns over an information vacuum about the energy giant's finances.

The stock was the most active by far on the New York Stock Exchange as the biggest trader of natural gas and power in North America suffered another rout in its 10th straight day of losses. 

Houston-based Enron has shed more than $17 billion in market capitalization in the past two weeks amid a series of disclosures about murky off-balance-sheet deals with partnerships run by its former chief financial officer. 

The disclosures destroyed the stock, forced the ouster of former CFO Andrew Fastow, led to a U.S. Securities and Exchange Commission inquiry and have caused at least one credit rating agency to slash Enron's senior-debt credit status. 

"This Enron situation is unique, and uniquely bad. The inability of the management to make a satisfactory response to all these claims and innuendoes has caused a mighty run on the stock for these past few weeks," said Sanders Morris Harris analyst John Olson. 

"I for one am at a loss to explain their reticence to respond." 

Enron stock closed down $2.65 to $11.16 in trading volume of 42.7 million shares, a good 47 percent more than the next most active stock on the NYSE. 

The shares crossed the $12 threshold for the first time since January 1993 in the morning, then repeatedly tested the $11 barrier throughout the session before touching a low of $10.95 shortly before the close — its lowest level since July 1992. 

As it had throughout the day, shares rebounded at the close by about 20 cents. That replicated a phenomenon seen repeatedly as the stock hit $11 throughout the afternoon, leading some analysts to suggest institutional investors were supporting the stock. 

Olson said the stock price was irrationally low, even assuming a conservative valuation of Enron's businesses at 14 times estimated 2001 earnings per share of $1.81. 

The company's core trading business is worth about $23 per share at those levels, Olson said. The total company, even accounting for losses from the failing broadband business, is worth about $27 now as opposed to $37 two weeks, he said. 

After cutting Enron's rating on Monday, Moody's Investors Service warned it could lower the rating even further, as well as cut Enron's short-term debt status. The cut coincided with Enron's confirmation that it was seeking additional credit lines to increase its liquidity, after tapping its full $3.3 billion revolving credit line last week. 

Enron has seen its credibility demolished as it has given piecemeal answers about its involvement in financial partnerships so complex as to confound even seasoned financial analysts who make their living unraveling earnings statements and balance sheets. 

Fastow was general partner in two partnerships, which paid him millions in management fees, that did business with Enron. They caused a $1.2 billion loss in shareholder equity after Enron was forced to repay the partnerships with stock once their investments, many into broadband, soured. 

Enron's fall this year has been steep, dropping from highs of $80 as recently as January amid an unending stream of bad news: from problems with a massive Indian power plant project, to recriminations from the California power crisis and the unexpected departure of former President and Chief Executive Officer Jeff Skilling, considered a key architect of Enron. 

This recent slide began Oct. 16, when Enron reported its first quarterly loss in four years, after it took $1.01 billion in charges and writedowns related to failed investments.