Enron Rebounds, Investors Seek Disclosure

Shares of Enron Corp. snapped back from 10 straight days of losses on Wednesday after investors said the deep plunge had made the stock attractive.

Shares of Houston-based Enron, which lost more than $17 billion in market capitalization during the rout, surged almost 27 percent in heavy trade, making the stock second-most active on the New York Stock Exchange and third-biggest gainer by percentage. 

Despite the surge, investors and analysts said they were still dissatisfied with Enron's failure to disclose key information and said the rebound could prove short-lived for the largest trader of natural gas and power in North America. 

"At this level the stock is attracting money. However, the near term is not going to be good," said Tim Ghriskey, president of money managers Ghriskey Capital Partners LLC. 

"We don't own any Enron. We have in the past and sold a while ago. We've been tempted a couple of times during the slide, but the information flow is not that strong, and there is potential for more negative surprises." 

Enron closed up $2.74, or 24.6 percent, to $13.90 on the NYSE. The stock surged to an intraday high of $14.17, recouping the past two days of losses, but is far from $33.84, the closing price for Enron on Oct. 16, the last day before the 10-day tumble began. 

Enron shares have been hammered over the past two weeks amid a series of unwelcome disclosures, including murky off-balance-sheet deals with partnerships once run by Chief Financial Officer Andrew Fastow. 

The disclosures forced Fastow's ouster, led to a Securities and Exchange Commission inquiry into Enron and caused at least one credit rating agency to cut Enron's senior-debt credit status. 

The company said Fastow's removal was aimed at assuaging investor concerns as the almost daily disclosures forced it to draw down about $3 billion from existing credit lines. 

Trying to Quantify 'Worst Case Scenario' 

But that's not enough, say analysts and investors. 

"Enron needs to substantially improve the level of disclosures," said Nitin Khandkar, a portfolio manager with Dubai-based Al Majid Investment Co., which owns Enron stock. "The accounting policies it follows should not be merely legal but should also reflect the company's true profitability." 

As an industry heavyweight, "investors expect Enron to come clean on the controversial issues," he said. 

One issue Enron would do well to address is its partnerships and the liabilities they may have. 

"People are still struggling with trying to quantify what the worst-case scenario could be," said Mike Heim, an analyst with A.G. Edwards & Sons, of the existing partnerships. 

"Instead of dismissing the worst-case scenario, I think it would make sense to mathematically show that 'here's what happens under such a scenario' and then let analysts make their own assessments." 

Enron's refusal to make public its finances with greater transparency is a hallmark of arrogance, noted one academic. 

"The lack of transparency is an arrogance that says, 'I don't have to explain anything because if people don't want to buy my shares, they can just sit and spin,'"said Paul Kedrosky, a professor at the University of British Columbia who sits on the board of Exponentia, a company dedicated to improving communications with shareholders. 

"It's an arrogance that says, 'I do not have to disclose anything until I am forced to,'" Kedrosky said. "The crucial thing is to disclose early and disclose all."