Enron Case.docx - Name: Ashraf Mohamed Abd Al Hamed. ID:...

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Name: Ashraf Mohamed Abd Al Hamed.ID: 17126079Enron Scandal: The Fall of a Wall Street DarlingThe story of EnronCorporation depicts a company that reached dramatic heightsonly to face a dizzying fall. The fated company's collapse affected thousands ofemployees and shook Wall Street to its core.At Enron's peak, its shares were worth $90.75; just prior to declaring bankruptcyon Dec. 2, 2001, they were trading at $0.26 to this day, many wonders how such apowerful business, at the time one of the largest companies in the UnitedStates,disintegrated almost overnight.Key factors:Enron's leadership fooled regulators with fake holdings and off-the-booksaccounting practicesEnron used special purpose vehicles (SPVs), or special purposes entities(SPEs), to hide its mountains of debt and toxic assets from investors andcreditors.The price of Enron's shares went from $90.75 at its peak to $0.26 atbankruptcy.The company paid its creditors more than $21.7 billion from 2004 to 2011.Enron's Energy OriginsEnron was formed in 1985 following a merger between Houston Natural GasCompany and Omaha-based InterNorth Incorporated. Following the merger,Kenneth Lay, who had been the chief executive officer (CEO) of Houston NaturalGas, became Enron's CEO and chairman. Lay quickly rebranded Enron into anenergy trader and supplier.Deregulation of the energy markets allowed companies to place bets on futureprices, and Enron was poised to take advantage. In 1990, Lay created the EnronFinance Corporation and appointed Jeffrey Skilling, whose work as a McKinsey &Company consultant had impressed Lay, to head the new corporation. Skilling wasthen one of the youngest partners at McKinsey.
Skilling joined Enron at an auspicious time. The era's minimal regulatoryenvironment allowed Enron to flourish. At the end of the 1990s, the dot-combubble was in full swing, and the Nasdaq hit 5,000.Revolutionary internet stocks were being valued at preposterous levels and,consequently, most investors and regulators simply accepted spiking share pricesas the new normal.

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