What started in the mid-1980s as essentially a staid old-economy business became the poster child in the late 1990s for companies absent to remake themselves into new-economy powerhouses. Unfortunately, what may have started with the best of intentions emerged as wizard of the biggest business scandals in U.S. history. Enron was created in 1985 as a proceeds of a merger between Houston intrinsic Gas and Internorth Natural Gas. In 1989, Enron started trading natural gas commodities and eventually became the worlds largest vendee and seller of natural gas. In the early 1990s, Enron became the nations premier electricity marketer and pioneered the development of trading in such commodities as weather derivatives, bandwidth, pulp, paper, and plastics. Enron invested billions in its broadband unit and water and wastewater system management unit and in hard assets overseas. In 2000, Enron reported $101 billion in revenue and a market capitalization of $63 billion.
The Virtual Company
Enron was essentially a company whose trading and risk management business outline was built on assets largely owned by others. The composite financial maneuvering and off- ratio-sheet partnerships that former CEO Jeffrey K. Skilling and chief financial officer Andrew S.
Fastow implemented were intended to remove everything from telecommunications fiber to water companies from the firms balance sheet and into partnerships. What distinguished Enrons partnerships from those commonly used to share risks were their leave out of independence from Enron and the use of Enrons stock as collateral to supplement the partnerships. If Enrons stock fell in value, the firm was obligated to let out more shares to the partnership to restore the value of the collateral underlying the debt or immediately repay the debt. Lenders in effect had position recourse to Enron stock if at any time the partnerships could non repay their loans in full. Rather than limiting risk, Enron was assuming rack up risk by...If you want to get a full essay, recite it on our website: Orderessay
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