Warnings from the Enron Message Board

Warnings from the Enron Message Board

James Felton and Jongchai Kim*

First Version: March 2002 This Version: April 2002

Abstract As Enron collapsed in 2001, most Wall Street analysts had either a “buy” or “strong buy” recommendation for Enron common stock. The largest bankruptcy in U.S. history was often described as coming “without warning” as $60 billion in market capitalization vanished. We searched postings on the Yahoo! Enron Message Board from 1997 to 2001 for warnings of a crash to come. We found a compelling four-year history of Enron as told by apparent insiders through anonymous posts. We present excerpts of 129 posts from Enron’s Yahoo! message board. The excerpts describe a disturbing corporate culture at Enron, and they contain repeated warnings for investors to get out while they can. Keywords: Enron, message board, scandal, inside information, governance JEL Classifications: D82, G11, G14, G24, G38, M52

*

Contact author is James Felton, Professor of Finance, Central Michigan University, [email protected], 989774-3269. Jongchai Kim is Assistant Professor of Finance at Xavier University of Louisiana in New Orleans.

Introduction On August 15, 2001, Enron employee Sherron Watkins wrote a letter [2002] to Enron’s President and CEO Ken Lay warning that Enron “will implode in a wave of accounting scandals.” Four months earlier, in April 2001, an anonymous post (by “enron is a scam”) on Enron’s Yahoo! Message board [2002a, message 11,460] warned “It will soon be revealed that Enron is nothing more than a house of cards that will implode before anyone realizes what happened. Enron has been cooking the books with smoke and mirrors. Enron executives have been operating an elaborate con scheme that has fooled even the most sophisticated analysts.” In October 1999, “Johnmanfrengenson” [2002a, message 1,967] wrote: “Lots of inside trades lately. Look at the lease obligations in the footnotes of the 10K. There are a lot of liabilities that are not included in the balance sheet numbers. If you included the lease obligations to the balance sheet, you might think differently about the valuation of ENE.” There were many other messages from 1998 to 2001 by apparent insiders advising investors to take notice of Enron’s problems. There are currently three topics hitting Wall Street simultaneously due to the fall of Enron. First, companies’ financial statements are being scrutinized in much more detail than usual by investors, analysts, and the SEC. The dual role for accounting firms such as Arthur Andersen as both auditors and as consultants is being questioned. Second, investment bankers are under attack for their dual role as both brokers and bankers. Sell-side analysts had mostly “buy” and “strong buy” recommendations for Enron at the same time that their firms sought banking relationships with Enron. Third, the lack of diversification for many companies’ 401(k) 2

plans is being investigated following the devastating losses for Enron employees in their retirement plans that were heavily weighted with Enron stock. We believe that a fourth topic from the collapse of Enron is going unnoticed. It appears that employees at Enron disseminated information to the public through anonymous posts on the Yahoo! message board. Some of the posts appear to contain inside information. Many of the posts are very detailed in their criticism of Enron management under Ken Lay and Jeff Skilling, and they complain of Enron’s complicated accounting practices and close ties with Arthur Andersen. Of course, the posts are all anonymous, and we cannot prove who wrote them. Our goal is to open the debate on the role that message boards play in disseminating inside information to the public. There are several implications of having insiders posting on message boards. For investors, it means that stock message boards contain better information than is widely believed. For companies and regulators, it means that existing securities laws and non-disclosure agreements need to be enforced more rigorously to stop employees from posting inside information on message boards. The SEC increased its surveillance of the Internet in 2000 with a “Cyber Patrol” of employees who search web pages and message boards for securities fraud, and the SEC [2000] makes it clear that it is illegal for investors to buy stock when they are aware that material nonpublic information is used. However, monitoring thousands of message boards for insider information is a daunting task. It does appear that someone within Enron management monitored the Yahoo! message board. A message [2002a, message 184] in May 1998 by “EI Police” says that Enron’s e-mail and Internet are for “ Enron business purposes. . . Enron can, and does, electronically monitor the use of its equipment. . . Failure to abide by these 3

restrictions may subject individuals to disciplinary action as well as civil and/or criminal prosecution.” Message Boards and the Dissemination of Information Stock message boards are not held in high regard by investment professionals. A large percentage of the posts can be categorized as either cheerleading, bashing, or “spam.” Cheerleading includes posts such as “This stock’s going to $100!” without giving any justification for the rise. Bashing a stock involves spreading negative, usually untrue, information about a company. “Spam” usually refers to unwanted e-mail, but on message boards it refers to off-topic messages that are attempts to sell a product or hype a stock. Yahoo! began opening stock message boards in 1997 for thousands of companies. The boards are meant to be a place where investors can chat anonymously about a company. Yahoo! does not charge a fee for their message boards, but registration is required for posting messages. Registration is not required for reading messages. To register only takes a few minutes, and Yahoo! requests a person’s name, e-mail address, date of birth, gender, zip code, and occupation. Once registration is complete, investors are free to post anonymously under one or more selfselected Yahoo! IDs. The Yahoo! Privacy Policy [2002b] warns of termination of a Yahoo! account if inaccurate information is provided during registration. Yahoo! does not control the content posted on message boards, and they do not guarantee its accuracy. However, they routinely delete posts that are offensive or “spam.” Yahoo! will also terminate an account for vulgar and libelous messages, for impersonating someone else (such as a company executive), and for posting inside information or information that violates a non-disclosure agreement. The Yahoo! Enron Message Board [2002a] opened on November 26, 1997. For the first 4

26 months (November 1997 through December 1999) there were usually just a few posts per day. June 1999 was the busiest month with 272 posts, or 9 per day on average. Posting on the board became more active in 2000, with an average of about 450 posts per month, or about 15 posts per day. In 2001, postings per month rose dramatically from 1,019 (33 per day) in January to 68,257 (2,200 per day) in December. Posts dropped sharply to 2,541 in February 2002 as the stock traded below $1 per share and Congressional hearings of the Enron scandal were televised nationally. Table 1 contains the messages posted per month on the Enron Yahoo! Message Board. There were 218,724 messages posted during the 52-month period, with 196,565 (90%) of the posts made in the final five months. The surge in posts per month on the Enron board that began in January 2001 may be explained by Wysocki [1999]. In a cross-sectional study of the message board activity of 8,011 stocks, Wysocki [1999, p. 21] finds that message board “posters focus on firms with the largest informational asymmetry, the poorest accounting information, the highest uncertainty and risk, and the greatest likelihood of generating future information flows.” Table 2 contains edited excerpts from 129 posts on the Enron board along with an Enron timeline. Most of the posts in Table 2 are excerpts of long messages, but some of the posts in the table contain the entire message posted. Some of the messages are also edited for clarity. They are partially edited for spelling, punctuation, and grammar. All-caps are replaced with lowercase letters, and some of the abbreviations are replaced when the meaning is obvious. For example, KL is replaced with Ken Lay, EOTT is replaced with EOTT Energy Corp., and NDA is replaced with non-disclosure agreement. Common abbreviations found in message boards include OT (off-topic), DD (due diligence, meaning research on a company), IMO (in my 5

opinion), IMHO (in my humble opinion), and EOM (end of message). Table 2 is both long and unorthodox, but it provides investors with a unique look at an Enron timeline coupled with posts from the Enron Yahoo! message board. There were repeated warnings by apparent insiders for investors to sell. There are also posts from confident Enron employees who planned to retire early with the gains from their Enron stock. Conclusions The collapse of Enron is one of the largest financial scandals in U.S. history, and its details are still unfolding. The quotes from 129 posts on the Enron Yahoo! message board in Table 2 give a compelling account of Enron as told by apparent insiders from 1998 to 2001. For readers of the Yahoo! board, the fall of Enron was not without warning. For companies and regulators, a closer look at anonymous employee postings on message boards is warranted.

6

References

“The Letter to Ken Lay.” www.fortune.com, January 16, 2002. U.S. Securities and Exchange Commission. “Fact Sheet: Regulation Fair Disclosure and New Insider Trading Rules,” at www.sec.gov, August 10, 2000. Wysocki, P. “Cheap Talk on the Web: The Determinants of Postings on Stock Message Boards,” Working Paper, University of Michigan Business School, November 1999. Yahoo! Enron Message Board. At messages.yahoo.com/?action=q&board=ene, 2002. Yahoo! Privacy Policy. At privacy.yahoo.com, 2002.

7

Table 1 Messages per Month on Enron’s Yahoo! Message Board Number of Messages Posted Per Month Rises Dramatically from November 1997 (4) to December 2001 (68,257).

Month

Year

Messages

Total

Month

Year

Messages

Total

November

1997

1-4

4

January

2000

2,246-2,869

624

December

1997

5-25

21

February

2000

2,870-3,395

526

January

1998

26-42

17

March

2000

3,396-3,643

248

February

1998

43-60

18

April

2000

3,664-3,916

273

March

1998

61-78

18

May

2000

3,917-4,310

394

April

1998

79-123

45

June

2000

4,311-4,766

456

May

1998

124-207

84

July

2000

4,767-5,176

410

June

1998

208-288

81

August

2000

5,177-5,975

799

July

1998

289-362

74

September

2000

5,976-6,325

350

August

1998

363-469

107

October

2000

6,326-6,692

367

September

1998

470-567

98

November

2000

6,693-7,274

582

October

1998

568-639

72

December

2000

7,275-7,697

423

November

1998

640-681

42

January

2001

7,698-8,716

1,019

December

1998

682-745

64

February

2001

8,718-9,543

826

January

1999

746-844

99

March

2001

9,544-11,017

1,474

February

1999

845-940

96

April

2001

11,018-12,202

1,185

March

1999

941-1,055

115

May

2001

12,203-14,014

1,812

8

April

1999

1,056-1,125

70

June

2001

14,015-16,215

2,201

May

1999

1,126-1,242

117

July

2001

16,216-18,193

1,978

June

1999

1,243-1,514

272

August

2001

18,194-20,130

1,937

July

1999

1,515-1,694

180

September

2001

20,131-22,159

2,029

August

1999

1,695-1,824

130

October

2001

22,160-30,400

8,241

September

1999

1,825-1,906

82

November

2001

30,401-95,321

64,921

October

1999

1,907-1,981

75

December

2001

95,322-163,578

68,257

November

1999

1,982-2,115

134

January

2002

163,579-216,183

52,605

December

1999

2,116-2,245

130

February

2002

216,184-218,724

2,541

9

Table 2 Quotes from Enron’s Yahoo! Message Board Anonymous posts from Enron’s Yahoo! message board and Enron timeline. Quotes in table are edited excerpts of posts made January 30, 1998 to January 25, 2002. Stock price is closing price on the New York Stock Exchange on day of post (or most-recent closing price for weekend and holiday posts). Stock prices are not split-adjusted.

Message Number

Date of Message

41

1/30/98

Yahoo! ID of Author PermianBasin

Title of Message EOTT is for sale

Stock Price $41.44

One of Enron’s children, EOTT Energy Corp. is looking for a buyer. Top management are starting to get pink slips. The officers are looking to jump ship. $ $

$

March 18: Andrew Fastow named CFO of Enron. He joins Ken Lay (Chairman and CEO) and Jeffrey Skilling (President and COO). May 4: Enron announces registration for secondary stock offering of 15 million shares priced at $50 per share underwritten by DLJ, CS First Boston, Goldman Sachs, Lehman Brothers, Merrill Lynch, Painewebber, and Jefferies & Company. Underwriters are given an option for 2.25 million shares of over-allotment stock. May 6: Rebecca Mark named Vice Chairman of Enron.

161

5/12/98

harrietsweetharriet

Trying to understand ...

$52.93

Things are very upbeat at Enron. We just celebrated “Enron Day” for the stock hitting 50. It was quite a treat. Enron is a wonderful company to work for, many perks. And, yes, I get my stocks through Enron, another perk. 165

5/13/98

GordGekko

ENE - the good, the bad, the ugly

$52.31

The Ugly: ENE’s aggressive mgt sometimes gets it into trouble. That is they aggressively go after what they want only to find it isn’t what they wanted in the first place. The final ugly is that ENE is a very complicated company with a very complicated financial structure, and very complicated business deals. From cross commodity swaps, to volumetric production payments, to take or pays, ENE is run by about 20 guys (and one woman) who are the only ones that actually understand what is going on. 167

5/13/98

GLSmyth

Re: Trying to understand ...

$52.31

I, too, get my stocks through Enron via DRIP and am very upbeat as to the company’s long-term potential. I expect that I’ll begin thinking about selling somewhere around 2017 and look forward to a long relationship with this company. 169

5/13/98

Enron 1400 Smith Street

I know something you don’t know ...

th

Lots of action on the 50 floor. Look for a spin off soon.

10

$52.31

182

5/15/98

Enron 1400 Smith Street

I will Prove I know what I’m talking about

$50.75

EOTT Energy Corp. will be sold by end of summer ‘98. 184

5/15/98

EI Police

FYI

$50.75

Enron International’s computing equipment and services (this includes E-mail and Internet usage) are to be used for Enron business purposes. Enron is the sole owner of all data created, stored or transmitted using company equipment or services. Enron can, and does, electronically monitor the use of its equipment to ensure that employees adhere to above policy. Failure to abide by these restrictions may subject individuals to disciplinary action as well as civil and/or criminal prosecution. 186

5/15/98

Enron 1400 Smith Street

Enron Police?

$50.75

th

Typical 50 floor “we need to control our employees and work them 70 hours a week” gobble dee goop. Come get me. I’ll just go somewhere else. 193

5/20/98

HondaF6

On India

$51.00

It all boils down to politics ... and Ken Lay is a master, whether it’s local, state, national, or international. 217

6/02/98

lankygoober2

Enron Career?

$50.25

As a former employee of Enron I would tell you that Enron’s corporate culture is a take no prisoners, we can’t be wrong attitude. Egos run high in the company, and everybody is a deal maker, with little or no value placed on the people who support the deal makers. 220

6/04/98

HondaF6

Enron Culture

$50.13

Enron is a very dynamic company with plenty of opportunity for the “right” people. If you are young, bright, attractive, articulate, motivated, and have an engineering, MBA, or JD (preferably all three) come on down. You will fit in well and have a great career. 238

6/17/98

JanisJoplin298

ENE

$49.75

ENE the virtual company. Profits for 10 years forward being taken in current years. When you shake it down what do you have? The paper mache company.

11

240

6/17/98

GordGekko

Janis Doth Sing the Blues

$49.75

Janis, You have a good point. It’s ok to do this sort of present value stripping; however, that just means you have to do twice as many deals next year. Can ENE keep it up? I have talked to many analysts who feel ENE’s financial structure is so complicated. I mean, yes, they’re making money, but will this well head blow? Pulling more deals is one way to make money, but ENE could just as easily bring greater shareholder value by simplifying the capital structure and clearly articulating its deals. 242

6/19/98

JanisJoplin298

Get it while you can

$49.81

Can they keep it up is the question. The structure is complicated for a reason, and let’s look at why they make money. They have to keep finding new “projects” to replace the earnings they have sucked out of the current projects. The domino theory is present. 244

6/19/98

tedqwert1

It’s not that complicated

$49.81

If you find ENE’s structure too complicated, Janis, then maybe stocks aren’t for you. Anybody with even the most rudimentary understanding of accounting shouldn’t have a problem with it. 249

6/21/98

JanisJoplin298

believe the spin doctors huh?

$49.81

Rudimentary understanding of accounting ... you’re a joke. If you profess to understand what ENE is doing you would be singing a different tune buddy. I believe I read your remarks in Lay’s comments in the annual report. Do you know they pay people millions to write that stuff for you to read? 266

6/26/98

abs1nthe

temper temper

$50.63

I like this company too, but am worried because like Janis said, their accounting is way too complicated. That usually means it’s easy and tempting to hide things and smudge things. 269

6/26/98

JanisJoplin298

The roll

$50.63

Here’s a concept for you. You have sunk line fill (working gas) and you want to monetize it because today there is a lot of profit in it and you need the cash. What you do is sell the inventory to a friendly entity, pocket the cash, book the profit and buy it back in ten years, indemnifying the friendly sole against the market. No problem, but what do you do next year when you want to outdo your last year’s earnings? Another idea: loan money to business partners . . roll forward the interest to current year earnings. Just got to keep replacing those assets! 309

7/10/98

EnergyJunkie

You are getting warm!

$54.68

I’ve heard that ENE is pretty creative in the accounting with activities outside of the USA. Wonder how and when this will start to show up on the books. $

July 24: Enron acquires UK water company and forms new global water company called Azurix.

12

344

7/24/98

dumptyhumpty

What next?

$55.25

Fiber-optic networks, natural gas, electricity, and now water? Jeez, this company is crazy, and I think it’s great! It seems like this company wants to rule the world some day. Boy am I glad I got in back in the 30s and 40s. This company is going in so many different directions, which would normally scare the hell out of me, but I have a lot of confidence in our mgt team. 355

7/28/98

falcon325

Water deal is vintage Ken Lay

$54.25

Hey there, corporate execs! Is your ROE in the low single digits? Does “goodwill” make up almost 8% of your assets? Did you just have to eat a $675 million charge on some deal gone sour? Don’t despair! Use the Ken Lay approach to shareholder management! First, drop $1.3 billion in some Third World country with a history of strict currency repatriation laws where they’re currently having food riots. Have an earnest-looking junior exec look firmly into the camera and say something profound and inscrutable like, “This is an essential component of our strategy for the Southern Cone.” Then stick a cool $2 billion into an overseas investment in an industry you know absolutely nothing about! Put on your best suit and pronounce, “The global water market is a $300 billion business!” Now, just be ready to roll out some exciting new business when you start to figure out that it tends to be a rather unprofitable $300 billion business. Keep things rolling! The bigger the company, the bigger the comp package! Remember campers, you don’t have to know how to run a company profitably if you can tell a good story and keep things in motion. You’ll be retired on your own private island in the East Indies before the chickens come home to roost! 403

8/12/98

dumptyhumpty

Lay sells 125,000 shares

$47.75

The Washington Service Bureau reports that Ken Lay “sold 125,000 shares at $53.88-$53.94, bringing holdings to 945,694 shares.” This sale occurred on 7/30/98. You think he knew the water deal would send the stock tumbling? 481

9/03/98

Enron 1400 Smith Street

Buy! Buy! Buy!

$43.68

$42 a share and a 15+% dividend which is guaranteed by Enron through 1999. Buy now, lock in the high yield, and hang on for next week’s press release. This puppy is going for a ride. 582

10/08/98

falcon325

Smoke and mirrors

$51.38

I’ve followed Ken Lay’s career since his days at Florida Gas Transmission. He’s built a very large company that pays a very large comp package. He likes to see his name in the paper. ENE under his tenure has developed a flashy reputation. It has not out-performed the competition. He has not delivered value. His management team is smoke and mirrors.

13

586

10/12/98

falcon325

Bluegoose, thanks for the J-Block post

$50.93

I was afraid that’s what happened. ENE’s cocky management team gambled and lost. Investors need to understand the nature of the stock they’re buying. If you buy into Ken Lay’s crap game, you might get rich, but you’d better be ready to lose. 592

10/12/98

falcon325

Point well taken

$50.93

ENE seems to like to manage risk with insufferably clever financial deals. There is an old fashioned way to manage risk. You stick to businesses you understand and watch things very, very carefully. 607

10/14/98

GordGekko

FYI for 1400 Smith Street

$51.31

PORTLAND, Ore. (AP) - An Oregon-based utility seeks more than $1 million from an unidentified John Doe who allegedly posted confidential insider information on a Yahoo! message board. The John Doe (known to Yahoo! users as “belezatropics”) wrote that third quarter earnings for the energy firm were so bad that the company planned to issue a warning that earnings would be lower than expected for the rest of 1998. The company’s lawsuit claims federal securities law obligated John Doe to keep the information confidential until the company released it officially later that day. 610

10/15/98

GordKekko

Ex - not for you

$52.18

Sorry to have spooked you. The post was about a poster named 1400 Smith Street. Claimed he was an ENE employee and tipped the EOTT Energy deal about a month before it happened. $

November 6: Merrill Lynch initiates coverage of Enron at Near-Term Accumulate/Long-Term Buy.

660

11/10/98

falcon325

Once upon a time . . .

$56.43

Tulip bulbs were all the rage. All over Europe people were nuts over tulip bulbs. The sky was the limit. People made fortunes investing in tulip bulbs. Then, one day, someone woke up and said, “What the hell, it’s just a flower. What’s this damn thing really worth?” And overnight, the great speculative market in tulip bulbs collapsed in a heap. Hopefully, ENE is more than just a pretty flower. But don’t forget, unless you sold, yesterday’s stock price is history. Just history. It’s what some other investor got paid. The question is, what will you get when you decide to sell? Are managers who know what they’re doing carefully managing assets with underlying value? If not, you’re just buying tulip bulbs. $

December 7: First Albany initiates coverage of Enron at Strong Buy.

743

12/30/98

cperdue

Bearish on ENE

$56.63

First, let me start off by saying that I realize that this stock has done well. But when I look at the numbers it does not add up. Since 1994 EPS has grown at a paltry 8.3% a year. Profit margin has fallen from 5% to 2.4%. And they have more debt than they have equity. $

January 11: First Albany downgrades Enron from Strong Buy to Buy.

14

$

January 13: BT Alex Brown initiates coverage of Enron at Buy.

755

1/13/99

tedqwert1

Enron’s ROE is abysmal

$63.63

ENE has shown a terrible ROE for years running. The only way the company has even managed to get into (barely) double digits is to employ massive leverage. ROA is in the low single digits as is the net margin. One reason to be optimistic on the stock is that an even mildly competent management team should be able to generate better margins if they would just put some effort into it instead of deciding on a new strategic direction every six days. 852

2/02/99

Mtree1

Sam, the last ESOP retirement shares

$64.81

Not many will sell because these shares are the major portion of Enron’s retirement plan. A small cash value plan is in place for new and existing employees of Enron. In other words to sell the ESOP shares is to ruin your retirement future. True it can be rolled into an IRA or the Enron 401 and be traded for other investments but not many do that. 910

2/19/99

GordGekko

Lack of Vision

$61.31

In a nutshell some past indications of a clear lack of vision: Entering the retail energy market with little consideration of stranded costs; blowing millions on ramping up and advertising; and then pulling out. The retail division is still hemorrhaging $100 million per year. Entering the international power market full force with little consideration of political risks. Got caught behind the North Sea contracts and was sued. Betting the future of the company on the wholesale energy markets. Spinning off EOG Resources at the bottom of the market. They have done a good job of cooking $ out of the annual books. 918

2/22/99

GLSmyth

RE: George!

$64.00

Perhaps the “lack of vision” is a strength in that they are not limiting themselves. Personally, I’m glad to see them stick their necks out and give some things a try. This is one of the reasons I have been in their DRIP and expect to be over the next 18 years. 968

3/10/99

cb houston

Bullish

$70.00

As an Enron employee and a holder of options as well as their stock in my portfolio, I see nothing but wealth ahead. All you naysayers go, there will be others to pick up your future gains. I have worked for many Fortune 500 companies in my lifetime, and there is not a single company I would care to retire under other than Enron. $

March 18: Robertson Stephens initiates coverage of Enron at Buy.

15

1059

4/02/99

maingydog

Is Rebecca Mark selling out?

$64.44

The rumor on the street is that Rebecca Mark is putting 250,000 issues of ENE common on the block. Is it a cash-out or does she know something we don’t? I am a little disturbed with the news and am reconsidering my holdings here. Come out Smith Street and give us the low down on this. Is ENE in trouble or does she just want $16 million? $ $

April 7: The Houston Astros and Enron announce that “Enron Field” will be the name of the Astros’ new baseball field. April 14: First Albany upgrades Enron from Accumulate to Buy.

1113

4/28/99

cb houston

Target=$90, 12 months or sooner

$72.00

As an Enron employee for a few years, I have come to easily expect $200 in 3 years. I will then not worry too much about my “golden years,” grin . . . . 1120

4/29/99

cb houston

Top Cat

$74.00

When I came to work for Enron I was a bit skeptical, but in the 5 years that I have been here I am more than pleased. I have no crystal ball, but what I have seen in this company and their being rated by Fortune year after year as the “most innovative” should say something. As IBM was once a household word, so will Enron be. 1141

5/06/99

Arbitrage2000

Lay/Wittenberg

$76.00

There is one issue that may make you question Ken Lay’s motives when you do some research. Somehow his Sister’s travel agency Lay/Wittenberg has Enron’s travel accounts. Enron generated over $2 million in commissions for this agency. Maybe this is legitimate, however it could raise a few eyebrows, just disseminating information to ensure people know the facts. 1144

5/07/99

Alan Greeneggsnspam

Legislation Sausage Oxy Hammer

$76.25

Don’t look under the hood, you will not like to see where some of Ken’s interests lay. As with many CEOs Ken is entrenched on all sides. At some point the CEO perceives the company as a personal venture. Stacked board, some nepotism, and dollars going in all curious directions. $ $

May 11: Jefferies & Co. downgrades Enron from Buy to Accumulate. May 25: Salomon Smith Barney upgrades Enron from Neutral to Outperform.

1299

6/07/99

falcon325

Insider trading

$77.93

Since the beginning of this year, 17 Enron insiders have sold 1,529,991 shares of the company’s stock worth $104.2 million. That includes 200,000 shares worth $13.5 million for Dr. Lay, 125,924 shares worth $8.7 million by Mr. Skillings, and a whopping 515,691 shares worth almost $34.6 million by Ms. Mark. Excuse me folks, but isn’t all this insider trading a screaming vote of “no confidence?”

16

1318

6/08/99

Jump Diffusion

Water Boys & Girls

$77.31

Ok it looks like this: ENE puts AZX (Azurix) into the Atlantic Water Trust. The Marlin Water Trust floats about a billion and a half dollars of debt and buys a 50% stake in the Atlantic Water Trust. Marlin Water Trust is made up of five institutions and their associates. Somewhere in here between Marlin and Atlantic; Lay Skilling, Mark, and all the others are probably rolling their proceeds from sale of ENE stock. Rebecca signs on for $750K salary. $

June 9: JP Morgan initiates coverage of Enron at Buy.

1354

6/11/99

sam miam

Vector Value PE, etc. etc.

$80.88

By two dozen methods of value Enron fails to measure up. Enron has enjoyed index money manager and fund buying because it entered the Dow Jones Utility Index 18 months ago. There is reason to suspect that it will be a short-lived utility index stock because of its changing profile. This is defined by a bubble. The ride is near being over. Enron has huge debt and depending on what they do with the water spin off monies may decide their ability to spin their way up. I really am not trying to convert anyone only trying to alert some to the fact we may have problems ahead. I think this is all spin and we should have never gone this high. 1387

6/15/99

Utility Watcher

Thanks for the detail

$79.43

You clearly described my uncertainties with ENE. It’s a great company (I am an employee) but a 40 P/E? Come on, get real. ENE is and will continue to be a winner in the electric and gas markets and maybe someday in bandwidth, but I can’t see the growth potential in those markets right now to justify where we are. 1398

6/15/99

cashistrash

ENE’s Earnings

$79.43

Earnings have been significantly depressed because of the cost of installing the fiber optic network. The fiber is expected to be completed next year and the RBOCs will be lining up to get all or a piece of the fiber. Once the fiber is lit the costs will go down dramatically and the earnings will rise substantially, this is why you are seeing the PE ratio expand beyond the norm. Forget about last year and look at what is coming. 1411

6/17/99

sam miam

We are going to take on AT&T and LU

$79.18

Why do we want to bet the farm on some speculation play that we are not tooled to do? Let us read our mission statement. Some suspect that we are in big trouble looking over the Internet. Deregulation is on Gov. Bush’s desk awaiting ink. People are moving in on our core business and will take a share. How will we service our debt if we lose ground in our profit centers? Are we maintaining our profit centers or are we mulling around in the pasture looking for mushrooms in the cow pies? I suspect we are in trouble and will see a healthy retraction as it is realized by the investment public. I assure my feelings are built on a lot of information from outside your company and tips and pointers from inside the company. I suspect we are in trouble.

17

1417

6/18/99

cashistrash

Sam iam, I think we agree

$77.88

Enron is getting their fiber in the ground cheap and fast, and they will be in a position to sell the capacity at a very reasonable rate. Have you noticed that one of the best performing mutual funds, Janus, bought nearly 15 million shares since the beginning of the year? I have a feeling they don’t think it is over-valued and they aren’t very interested in the power generation capabilities of ENE. My educated guess says that it is the fiber optic network. 1425

6/21/99

sam miam

jdonald6

$76.63

I suspect the books are cooked regularly at Enron and we may be to the place and time to take our medicine the next earnings report. I am not happy with the identity crises we are having. One factor I like is Enron’s dynamic ability to recover. 1441

6/22/99

cb houston

Here is one for ya, USS Enron

$77.00

In the last company info periodical mailed out, there was an article about their problem of getting enough LNG (Liquified Natural Gas) to their new power plant, India I believe. Their solution, being the innovator they are, start a fleet. I understand while going into partnership on one tanker, they are having a new one built for $240 million. What’s next? How about a baseball field in Houston? Ok. $100 million for Enron Field. Go big E. 1442

6/22/99

sam miam

Very old news

$77.00

Enron owns two tankers that will be used to transport LNG to India for electrical plants from the Middle East. The fuel profit, transportation charges, plus the profit margin on the electricity and construction fee paid to Enron construct will be nice. We will make money. I have no idea that Enron owns and operates 1300 companies but do know that 95% of Enron’s returns on its assets are from the above named activities and will continue to for some time. 1444

6/23/99

falcon325

‘bone: you have much to learn . . .

$77.31

I have been fascinated for a long time by ENE’s ability to wow investors with its latest scheme. Of course, the latest investment costs money and isn’t all that profitable right now but a satisfactory return by ENE is just over the rainbow. With the S&P 500 rocking along with returns on equity pushing 20%, ENE limps along at about half that. In the meantime, its stock price keeps floating up with each “great new idea” and the executives are getting obscenely rich. We tried conglomerates in the 1960s and backed off when we learned that executives - no matter how smart they are or think they are - cannot run 1,300 (to pick a number) different businesses. This company needs to focus - to stand and deliver before the castle in the air comes tumbling down.

18

1445

6/23/99

bearene

1300 Companies

$77.31

Do not confuse the multitude of Enron entities as companies in the sense that each is an actual business. Many (or most) are utilized to 1) segregate discrete lines of businesses; 2) for management reporting purposes; 3) tax planning vehicles. I am sure this is not very different than any other large corporation. Enron’s core businesses can still be counted on one (or two) hands. 1606

7/15/99

scrumy

One Excited Enron Comm Employee

$81.93

Being privy to the inside info I will tell all of you to visit the enron.net web page and look at what we are doing here in Portland. I would have to say that we are developing products that will revolutionize media transport and Internet multimedia quality and any ISP worth their weight will team with Enron Comm to deliver these enhanced multimedia broadcasts. I would advise strongly that you hold any and all stocks you have in Enron and pay attention to the new core business of communications. $

August: Enron divests stake in oil and gas production subsidiary, Enron Oil & Gas, which is renamed EOG Resources.

1750

8/14/99

sam miam

Enron looking better on Y2K

$87.69

I am a customer of Enron and buy $10 million of gas a month from them. I was and am in contact with the Enron status on Y2K. I am the chair person at my facility for Y2K and privileged to insider information involving ENE and their progress with Y2K. There are no details I can disclose. I will say that ENE is up to speed and is doing very well on Y2K. $

August 16: Enron’s 2:1 stock split takes effect.

1764

8/17/99

RakesProgress

Selling

$44.31

Some monkey business with AZX (Azurix) is my guess. If you look at the structure of that deal there is a trust that owns a good piece of AZX. A trust in turn owns a good piece of this trust. There’s a bunch of debt and other agreements mixed in. My guess is that Ken (and others) are somewhere in this Russian Doll structure. 1818

8/30/99

RakesProgress

Forget Fundamentals

$41.25

Although ENE mgt will take full credit, a 40 PE has more to do with the market. Finance fundamentals that we were raised on mean a whole lot less. Dare I say a paradigm shift? There are a lot of dollars chasing a handful of good companies. Our traditional valuation senses have less and less value. If you can steer your company into becoming one of these “good companies” you will hit pay dirt beyond your wildest imagination. Never in the history of the world has any little scrap of innovation been so handsomely rewarded. Sure makes you re-think about the way companies should be doing business.

19

1822

8/31/99

wisdomeye

Don’t get hung up on a PE

$41.88

Tell Dell’s investors (74 PE) that a 40 is too high. They’ll laugh. PE ratios are over-rated in today’s market and have been for a few years. $ September 23: EOTT announces that its IPO of 3.5 million shares is priced at $16 per share and underwritten by PaineWebber, Lehman Brothers, Dain Rauscher, and ING Barings. $ October 7: CIBC World Markets upgrades Enron from Hold to Buy. $ October 26: Nelson Mandela receives the Enron Prize for Distinguished Public Service. Previous winners are Colin Powell, Mikhail Gorbachev, and Eduard Shevardnadze. Enron announces the launch of EnronOnline, a web site for trading global commodities. $ October 28: Dain Rauscher Wessels initiates coverage of Enron at Buy. 1967

10/28/99

johnmanfrengenson

Not Sure about Comm Spinoff

$40.31

Lots of inside trades lately. Look at the lease obligations in the footnotes of the 10K. There are a lot of liabilities that are not included in the balance sheet numbers. If you included the lease obligations to the balance sheet, you might think a little differently about the valuation of ENE. $

November 9: Jefferies & Co. upgrades Enron from Accumulate to Buy.

2060

11/22/99

etrader2005

I am an Enron Comm employee and ...

$37.00

. . . we have 17,000 fiber miles in the ground with Europe and India soon in our sights. Corp. will downplay us but believe me, this stock is going up, up, up, very soon. BTW, all of this message is public domain and does not violate non-disclosure agreement. $

December 21: Enron ranked 24th best company to work for in America by Fortune, up from 73rd.

2203

12/22/99

alcd40

ENE Ownership of Azurix

$40.25

Is there anyone else wondering what ENE plans to do with its 1/3 ownership of AZX shares which have lost 65% of their IPO valuation within 7 months! ENE has apparently lost $550 million in this investment! How come no one is writing about this? How long can Ken Lay support Rebecca Mark? 2210

12/23/99

alcd40

AZX

$40.06

Things we agree on: 1) AZX is a failure, 2) We can blame management. I don’t believe the problems with AZX will go away on their own. Over time this will continue to reflect poorly on ENE.

20

2235

12/30/99

nycgordon

Ignore Rusoview comments

$44.25

The simple fact of the matter is there is a great deal wrong with AZX management. They have failed miserably to formulate and execute a workable strategy, most of them know nothing about the water business, and they’re completely detached from what’s going on in the trenches. That’s the reason, and the only reason, that AZX has lost over $500 million of ENE shareholder money over the past six months! This IPO was nothing more than an elaborate scheme to line the pockets of these already highly overpaid, arrogant individuals. For the life of me I can’t understand why brilliant business people such as Ken Lay and Jeff Skilling are sitting quietly on the sidelines. $ $

January: Enron announces plan to build high-speed broadband telecommunications network and trade bandwidth like a commodity. January 12: Banc of America Securities upgrades Enron from Buy to Strong Buy.

2349

1/12/00

yourmoneyismymoney

I agree, I too have been guilty

$51.50

I worked at ECT/EES (Enron Capital & Trade/Enron Energy Services). I left on my own terms. I enjoyed working there. I did have some concerns while working there though. In some areas they are sloppy and extremely top heavy (it seems that 50% of the employees are Directors, Sr. Directors, or VPs). Makes you wonder who actually does the work. In addition, incompetence is often promoted. We used to always say that Enron would have to stay on the run constantly, because if they ever stopped, they would be hit by all of the BS following them. 2378

1/14/00

mrfrank1111

Right thing? Not buying would be wrong

$56.38

I have held Enron stock in savings, ESOP, and retirement accounts for the last 15 years. My wife and I together have accumulated more wealth through this corporation than you can possibly imagine for our petty initial investment. The vision of the company 15 years ago was that the returns would be sound for the next 20 years. What an understatement. Our shares have an initial value of under $2.00 each due to the matching and ESOP. Hold and enjoy. This is a hundred year investment at worse. 2379

1/14/00

lovelady 1947

Go ENE!

$56.38

I too have had Enron stock for over 21 years and now it’s doing well enough that I can retire under the age of 55! Thanks to my employer - Enron Corp! 2389

1/15/00

crumbbum02

MCI Vice-Chairman - Short ENE Stock

$56.38

John Sidgman, Vice Chairman, has told high levels within the industry that Enron provides absolutely no expertise that can possibly help or enhance the communication industry! Enron has zero experience in this industry! John has said that ENE is worth $40 per share and should not be valued like a communications company.

21

2401

1/15/00

c0mm0b0y

Re: MCI Vice-Chairman - Short ENE

$56.38

Funny, very funny comment. Why is it that there are a lot of us here at ENE that used to work for MCI? I will tell you why. MCI/WCOM is very slow at implementing new technology. They have lost a lot of customers lately. Expertise is what MCI needs since we left. 2420

1/16/00

mrfrank1111

Well it is not

$56.38

Communication is icing on the cake. ENE is still a long without the Internet. Your climbing into this board is like me going to Jeff Gordon’s web site. It ain’t gonna happen. I’m an Earnhardt and Enron man. Both long-term winners, not flash in the pan. 2567

1/20/00

mrfrank1111

Frey, Buy or leave

$67.25

My cost basis in ENE is between $2-$3 per share after the splits and 15 years of patience. My wife and I have made $1/4 million in the last week. Buy in. The water is very comfortable. It’s going to get much better in the next 5 years. Ken Lay assured us that ENE was a solid 20-year stock back in ‘86‘87. Looks like he can add another 80 or so to his prediction. 2575

1/20/00

focusline

Enron - Strong sell

$67.25

No, no, that’s not my message. But there does seem to be one covering broker (out of 20) which has rated Enron a Strong Sell for several months at least. Anybody know which broker that might be, and what their reasoning is? Maybe all us silly-happy longs can learn something from this apparent contrarian. $

January 21: Merrill Lynch upgrades Enron from NT Accumulate to NT Buy.

2606

1/21/00

txk23

Too much bandwidth?

$71.62

If fiber can transport as much data as claimed, I’m a bit worried there may soon be a fiber glut, sending bandwidth prices way down. I’m reminded of Rockefeller’s production of oil in the late 1800s. 2660

1/22/00

leswestandmountain

ENE is proof that analysts are idiots

$71.62

The bright fund managers that valued this stock at $35 a couple of months ago now seem to think that ENE is worth something closer to $100 than $0. To all of those hard-working people out there investing in 401ks and mutual funds: I thank you. 2698

1/23/00

jurisdoc

Beware - insider trading & huge debt

$71.62

Before you jump into this stock at this high PE, carefully look at Enron’s massive liabilities and the chairman’s sale of Enron stock. This makes me nervous.

22

2734

1/24/00

AllBusiness101

Enron Chairman Still Owns 1.6 million

$65.00

Jurisdoc, if you were involved in a company where you owned this many shares you would know that it is not uncommon for estate, tax, and diversification to sell some shares. Just like you, it would be foolish to hold almost your entire net worth in one stock. So stop being an alarmist. If you are short state your position. 2755

1/25/00

zombiebull 2000

Bob Pisani’s mystified by electric util

$61.25

I’m not. You heard it here first. The big boys are secretly loading up for the revolution. Cable and DSL are dead. Broadband is coming over the power grid. I believe Enron is a major player. 12 month price target of $1,000. 2768

1/25/00

sam miam

MKBT my view

$61.25

I find Enron’s 10Q and any reporting done by Enron difficult to read as it is grouped in a way to deceive often. With so many accountants in the company and with the undisputed sharpest pencil in Houston I am suspicious of their reporting. I do not propose that the bottom line is not correct nor am I accusing the company of any wrongdoing. 2805

1/26/00

leandersanque

Enteron . . .

$61.13

. . . means alimentary canal, from the Greek word for intestines. When what is now Enron first merged Houston Natural Gas and InterNorth (of Omaha) into one company, the name chosen - with the help of computers - was Enteron. Almost immediately the energy trade press pointed out that “this means intestines in Greek,” and Enteron morphed into Enron. Obviously, the computer was not trained in the classics! 2806

1/26/00

knick knack66

AmberFaye - Enteron

$61.13

I remember those days well - along with trying to come up with a new, exciting corporate name and logos - to the tune of a half a million bucks (big time back in ‘86)! The new name surfaced and was presented to management - Enteron. Thank God, someone - just for the fun of it, or maybe out of boredom - picked up a dictionary and looked up the word. Needless to say, the ad campaign and the agency were dropped like a hot potato - big laughs in the field - $0.5 million down the tubes. 2819

1/27/00

ctrl pgmr

ENE logo & Mennen

$61.00

Particularly humorous when you also consider that the Houston Office Building was known locally as “The Speedstick Building” because of its distinctive shape! 2838

1/30/00

northbound 2000

mrfrank

$60.19

HNG-Internorth did, in fact, release the name Enteron before realizing that it was the name of the alimentary canal. Many jokes in the field as to which division was the end of the canal.

23

2941

2/04/00

bammel boy

Past is prologue

$61.75

Seems to me that in the late ‘80s (early ‘90s) Enron made an early investment in energy trading in Europe. They lost bundles - $100 million+ - at a time when they could hardly afford it. Turned out that some traders were doing their own auditing or something like that. I think a COO may have lost his job eventually. Could have been some of those traders went to prison. It was very, very bad. Lay was big-time embarrassed. Couple of years later, Enron becomes the biggest thing in energy trading. 2984

2/06/00

sam miam

I support George Bush Jr.

$61.75

What is improper in supporting a candidate that supports our best interests? The Lay-Bush connection is 20 years old. Enron did the economic summit and the Republican presidential convention when George senior was nominated for his second term. There is a deep-rooted connection between George Bush and Ken Lay. They are long-term personal friends. Word is that Ken Lay will be a cabinet member as chairman of commerce if Jr. is elected. 3402

3/01/00

arthur86plz

Debt

$69.00

Dig deep behind the Enron financials and you’ll see a growing mountain of off-balance sheet debt which will eventually swallow this company. There’s a reason they layer so many subsidiaries and affiliates. Be careful. 3533

3/16/00

s j harvey

Adios

$69.43

I’m out. The ESOP was very, very good to me. But I still had too much of my retirement tied up in ENE to make me comfortable about the volatility. So I’m gone. I will say that it’s important to diversity. I’m not exactly sure what that really means these days, but it doesn’t mean having as much of my personal wealth at stake as I had with ENE. And so I ride off into the sunset, happy with my experience at and investment in Enron. $ $

April 5: Dain Rauscher Wessels upgrades Enron from Buy to Strong Buy. First Union initiates coverage at Buy. April 13: First Union upgrades Enron from Buy to Strong Buy. Salomon Smith Barney initiates coverage at Buy.

4390

6/05/00

buzzardbait 2000

Quit it

$66.00

This is the 20th largest company in the world and next year it will be 15th. I have owned Enron since it was formed and will be able to retire next year at 44 when the stock hits $100 so just shut up and buy. Have a wonderful Enron day. $

July 19: Paine Webber upgrades Enron from Buy to Strong Buy.

24

5593

8/17/00

meade121212

Thanks shorty

$86.68

The worst part about holding a stock like ENE is lying awake at night knowing the whole house of cards could collapse at any time - personally knowing the management combined with the shaky ground upon which the entire power industry is built just add to these worries. $ $ $

August 23: Enron hits all-time high of $90.75 per share, market capitalization reaches $67.5 billion. August 25: Rebecca Mark resigns as Chairman and CEO of Azurix, and she resigns from Enron’s Board of Directors. October 12: CS First Boston initiates coverage of Enron at Strong Buy.

6725

11/02/00

popfartsaredelicious

Re: SEV

$83.25

Please do not invest in ENE until you have done your homework. You will realize that this company does not deserve a PE of 55, but a PE of 20. Please note the insider selling. They are bailing out faster than rats off a sinking ship. The rats are selling the stock. If they thought there was any upside they would hold on! 7299

12/02/00

criticalinvestigator

Re: Still looking for the down catalyst

$65.50

Lack of domestic assets, speculative trading with futures at all time high, lawsuit for price gouging in California, removal from the utility index, involvement and ownership of foreign power companies in countries that are energy dependent and likely to suffer most from high energy prices, lack of an understandable business plan, failure of the Enron spin-offs and subsidiaries to maintain profitability, the severe downturn of broadband business, mistrust of management, the company’s fuzzy math practice of accounting, massive insider sale of stock, and vagueness of direction. All of this coming to light because of the introspection by investors of their investments caused by the recent downturn in the markets. Skilling’s stupid statement that the oil companies were a thing of the past. Price target and outlook grim. 7410

12/08/00

lng cryo man

House of cards . . .

$73.06

starting to fall. Only those who have worked there know for sure. $ $

December 15: Bear Stearns initiates coverage of Enron at Attractive. December 18: Enron ranked 22nd best company to work for in America by Fortune, up from 24th.

8384

1/23/01

lowrad dog

Go figure

$78.56

By using Enron’s accounting methods I’m a $20 million plus a year business. Little old me, trading at home. I should take myself public.

25

8441

1/24/01

MainStreet Techie

Re: Bush: One Extension and That’s It

$79.75

Clearly the smart money is exiting ENE. Institutions and ENE high level management know that ENE is up against the law of large numbers, i.e. diminishing returns. It is going to get harder and harder to make their growth targets. ENE will get hit with all sorts of problems like the loss of myth status, multiple compression, outright financial losses, loss of key personnel, shareholder lawsuits, accounting issues, etc. When and if will this happen? Who knows, but the risk is out there and if you are long you will lose. $ $

February 6: Enron named Most Innovative Company in America by Fortune for sixth year in a row. February 13: Jeffrey Skilling becomes CEO of Enron in addition to President and COO. Ken Lay remains Chairman of the Board.

9454

2/27/01

rollmeoverinclover

Vigil - Butt Out!

$70.04

This company has a lot of problems with it deep in the trenches. It is good to warn others that the day of reckoning is on the horizon. Just wait. This sucker will be half the value it is today within 9 months. $

March 12: Arthur Anderson partner Carl Bass is removed from his Enron advisory role following complaints by Enron’s chief accounting officer Richard Causey that Bass objected to Enron’s treatment of year-end 2000 transactions that added $150 million of income for the year.

10,693

3/25/01

longmidc

Re: ENE status

$59.40

ENE has extremely intelligent employees - agreed. This is offset by selfish, personal-book focus management that has allocated several billion dollars to themselves that should have gone to the shareholders. There is not a business case in the universe where a CEO is worth $1 billion, let alone a dozen other executives. These clowns are the most overpaid management team on earth, bar none. They treat employees like dirt. To quote ENE mgmt “it’s the systems, not the people. We can put anyone on the trading desk and they will succeed, because they are trading for ENE.” 11,023

4/02/01

provenformula

Enron . . . pure speculators

$56.57

Wall Street tends to reward companies that make the majority of their money in speculative trading with a single-digit PE. The reason for this is that speculative profits are not sustainable. With natural gas prices in a narrow band of $5.00-5.50/mmbtu, it will be very tough for this company to sustain its earnings level. Ask someone who works there how successful EnronOnline has been. Hold the phone from your ear, the laughing or the cussing are likely to be quite loud.

26

11,460

4/12/01

Enron is a scam

Enron will soon collapse

$57.30

It will soon be revealed that Enron is nothing more than a house of cards that will implode before anyone realizes what happened. Enron has been cooking the books with smoke and mirrors. The Enron executives have been operating an elaborate con scheme that has fooled even the most sophisticated analysts. When the truth is uncovered, those analysts and ENE investors will feel like a raped school girl. The first sign of trouble will be an earnings shortfall followed by more warnings. Criminal charges will be brought against ENE executives for their misdeeds. Class action lawsuits will complete the demise of ENE. 12,209

5/01/01

hyperelectric8

Further Evidence of ENE Conspiracy

$62.41

On Bloomberg at 3:09 this morning, was an article entitled “Enron CEO Reinvents Company, Unnerving Investors.” Somehow, between 7:30 a.m. and 11:30 a.m., that article disappeared. It was replaced with one entitled “Enron CEO Takes Company in New Directions.” Now I wonder how that happened? My guess is Skilling gets on the phone to Mike Bloomberg. Investors beware, Enron tries very hard, all the time, to keep the wool over your eyes. From the top, Skilling, to the person charged with scanning all headlines to ferret out and destroy any negative spin. It tells me they have something to hide. The balance sheet is stretched, and the earnings story doesn’t work without related-party transactions and other blatant manipulation. No wonder your stock is getting trashed. You overpromised and under-delivered. $ $

$

May 2: Vice Chairman Clifford Baxter resigns from Enron. May 9: Peter Eavis, a senior columnist for TheStreet.com, writes the first of a series of articles warning investors to sell Enron stock. Eavis credits Mark Roberts, an analyst at Off Wall Street. Roberts published a 26-page report on May 6 citing Enron’s inflated PE ratio, poor earnings quality, and confusing financial statements. June 22: AG Edwards upgrades Enron from Maintain Position to Accumulate.

16,923

7/13/01

getrealenergy

Re: Cooked Books?

$48.78

ENE has real earnings, it’s just that they are still 2000 earnings. ENE shapes earnings (IMHO). I’ve seen it done at other spec shops. For example, I read that ENE took a $400 million reserve for the Kalistan disaster. I’ve read they only will be fined $39 million. Who the hell are their auditors? IMHO auditors should be fired in this whole thing. So, ENE books could be creatively cooked. Makes it look like they have consistent earnings when they are really a swing for the fences spec trading shop! 16,927

7/13/01

rugsi

Re: Cooked Books?

$48.78

“Who the hell are their auditors?” Arthur Andersen. The same office (Houston) of Andersen that ruined Waste Management by knowingly signing off on audit reports that were filled with irregularities. Cost them around $7 million on that one.

27

18,564

8/12/01

offwithkenshead

Caution! See Insider Trades of CEO . .

$42.81

. . . before you buy. If the CEO exercising options almost every single trading day for seven months doesn’t get this board or media talking, what the hell does it take? People must believe this Co’s CEO has Bush on a string or there would be nothing left of the stock price. $ $ $

$

August 14: Jeffrey Skilling resigns as CEO for personal reasons. Ken Lay becomes President and CEO in addition to Chairman of the Board. August 15: Sherron Watkins sends letter to Ken Lay warning of accounting irregularities at Enron. Merrill Lynch downgrades Enron from NT Buy/LT Buy to NT Neutral/LT Accumulate. August 21: UBS PaineWebber broker Chung Wu e-mails 73 clients (including Enron employees) with a sell recommendation for Enron, violating the firm’s e-mail policy. Wu is fired following complaints from Enron employees Mary Joyce and Aaron Brown who are in charge of Enron’s stock option plan. September 10: Bernstein upgrades Enron from Market Perform to Outperform.

21,074

9/11/01

southernboy48

Frightening

$32.76

The content of this board prior to the news from New York: investments, politics, liberalism, and conservatism, are all meaningless now. May God bless the United States of America, and may our leaders have the wisdom and courage to withstand this huge challenge. $ $ $ $ $

October 4: AG Edwards downgrades Enron from Strong Buy to Buy. October 9: Merrill Lynch upgrades Enron from NT Neutral/LT Accumulate to NT Neutral/LT Buy. October 16: Merrill Lynch upgrades Enron from NT Neutral to NT Accumulate. Enron reports a quarterly loss of $618 million and a $1.2 billion reduction in shareholder equity due to partnerships. October 19: AG Edwards downgrades Enron from Buy to Hold. October 22: SEC opens inquiry into Enron partnerships. Prudential downgrades Enron from Buy to Hold.

23,373

10/22/01

energynut2001

Re: Unless Enron clears up its house

$20.65

Enron is known through the energy world for its accounting gimmicks. There are more than this one that only come to light when things go wrong. The shareholders should demand the firing of Arthur Andersen and hiring of a new audit firm. The problem with the accounting rules is that it allows companies to go transaction by transaction in determining which ones they take to the income statement and which ones go to the balance sheet. Enron along with other energy companies take the gains to the income statement and the losses to the balance sheet. 24,189

10/24/01

DWAcorn

ENE hiding the paper trail?

$16.41

I bet their shredders are smoking. And to think the NYSE still allows this behavior. The NYSE should be investigated. Sorry to see investors suckered.

28

24,417

10/24/01

taconicracer

Houston, We Have a Problem!

$16.41

Skilling gone, Lay not talking, the CFO under fire, SEC investigation and lawsuits looming. Enron’s reputation has been severely damaged. If the Goldmans and Morgan Stanleys don’t want to trade with Enron anymore, there could be a domino effect on the business. What’s the story with the off-balance sheet deals? I don’t expect all questions to be answered immediately but I’d assume that Lay should be eager to explain the situation. 24,887

10/24/01

deloreanforsale

It’s Over for ENE

$16.41

Once a company starts playing games and BSing its valuable shareholders, and once mutual funds dump, then the company’s stock will go nowhere. These off-balance-sheet transaction with two limited partnerships run by Fastow are what are destroying shareholder confidence. And Fastow hasn’t even been fired. I think the entire management should be replaced otherwise this stock will languish in the doldrums for years. Take a look at LU, NT, JDSU, etc. Now ENE will join the club. $ $ $

October 24: CFO Andrew Fastow fired by Enron. Prudential downgrades Enron from Hold to Sell. JP Morgan downgrades Enron from Buy to LT Buy. First Albany downgrades Enron from Strong Buy to Buy. October 25: Banc of America downgrades Enron from Strong Buy to Market Perform. October 26: Salomon Smith Barney downgrades Enron from Buy to Neutral.

26,047

10/26/01

danwilson Yorkshire

While the smoke clears

$15.40

Ken has the bean counters working overtime. The CPA firm (Andersen?) has called in partners and managers to triple check every number in the 10Q. We just need to wait a few weeks for the smoke to clear. 26,473

10/27/01

oliviah26

Longs Should Take the $15 Before Chapter 11!

$15.40

Longs will lose everything unless they sell. I bet in the next week or so I would not be surprised if some people start getting arrested. Third party companies named after Star Wars characters! What in God’s name are they thinking? 26,559

10/27/01

white1wing69hunter

ENE has lost touch

$15.40

I trade Natural Gas with ENE on a daily basis. The lack of experience on the gas desk is amazing. There are very few experienced traders left in the empire. If you want to deal with some smart-ass MBA who really just wants to trade Nymex, call ENE. Everyone at ENE is more interested in their Nymex (speculative) position than they are about delivering physical gas to a point. ENE is nothing but a hedge fund. They have no physical assets to trade around. So what is a hedge fund with shady deals worth? That is the question every investor needs to ask. I don’t know but there are so many unanswered questions regarding ENE. Be careful of what you’re buying. This isn’t a utility. I hope ENE stays in business. As much as they piss me off, they provide liquidity to the market and every company in the energy business has deals that flow through ENE. If ENE goes bankrupt, the ripples will be felt through the country.

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October 29: Enron freezes employee retirement plans, claims freeze due to change in 401(k) administrator.

27,005

10/29/01

zace300

ENE’s Problem

$13.81

The company’s accounting is less than clear. The two really knowledgeable people, Shilling and Fastow, both left. This seems strange but remember these fellows used devices such as costless collars. Costless collars are set up when a customer, who owns a security or a commodity, buys a put and at the same time sells a call. The amount received from the call sale is offset by the amount paid for the put and thus is “costless.” Enron is on the other side of the collar, it sells the put and buys a call. There is no balance sheet effect as ENE has not spent any money on the collar. What ENE should do immediately is hedge the position by buying a put and sell a call at prices less than what the prices for the collar were. If it does this, it makes some money on the spread, books it as profit, and increases its assets by the additional cash. If the position is not hedged, ENE has the opportunity to make real money on its call or take a bath on the put if the security drops in value. Good accounting would seem to require that after a collar is issued and the position is not hedged, then the put and call positions should be marked to market. When ENE goes on merrily reporting profits, but pays little attention to its balance sheet, something might be screwed up. 27,563

10/29/01

antitrust007

Enron Debt

$13.81

Add anywhere between $9-12 billion to what’s on the balance sheet, and then you’re in the ballpark! If you only knew! 27,682

10/29/01

wstreet ny

I Feel ENE Is In Deeper Trouble Than We . . .

$13.81

. . . know. You can just feel the ball starting to roll from CFO & CEO departing at some very strange times. SEC now involved in an investigation and ENE is keeping silent. Boy you can just feel that at any moment this thing will explode into something seriously criminal. We should have known something was up when Skilling left for personal reasons in August. 28,040

10/30/01

kickoutman

Accounting Irregularities

$11.16

Forget this thing. The damage that recent events have created will not be reversed in quick order. I think more bad news is on the way. Look for news on accounting irregularities and lack of independence between Arthur Andersen and ENE. The auditors have always been real close to the ENE management.

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28,080

10/30/01

citywhizkid

Enron Corp - View from the Inside

$11.16

The accounting practices were fine in an expansionary bull market, but relied upon faith from investors. Skilling knew what he was doing when he said Broadband Trading was worth $30 billion, a pump and dump IMHO. Most commentators said it was just hype and propaganda, but suckers who followed the Wall Street analysts fell for it. Enron turned out to be nothing more than a modern day version of the “Emperor’s Clothing.” Turns out they thought they were big time looking good with Credit Trading, Broadband Trading, Pulp & Paper Trading, and Water Trading, but actually they were small time and were naked fools. They should have stuck to energy marketing/trading, but any staff who voiced a contrary opinion were ruthlessly silenced and sidelined. So why did so many fall for the hot air of the Enron hype machine?! Arrogance of (ex?) senior executives has led to this situation - now nonexecutive staff are paying the price. A sad time for the regular workers at Enron Corp. 28,156

10/30/01

xxx321xyz

Re: Enron Corp - View from the Inside

$11.16

No substance, all marketing. The engineers were thrown out, the power plants that had an IRR of 7% were thrown away (at least it wasn’t negative), everything of substance was lost except for marketing types. Those that did not care for these types of people or their proposals were discarded. 28,954

10/31/01

citywhizkid

Re: Enron Corp - View from the Inside

13.90

I totally agree with your sentiments (sounds like you too are/were an insider). Enron has been hijacked by staff who made their careers out of brown-nosing and hyping their own ideas or hyping their own abilities. The culture was one of showing off one’s abilities and gaining favour from one’s superior through social interaction and lobbying managers to favour them against others in the company. Anybody who created real quality work or was vital to the company but never complained or lobbied (“the quiet ones”) was sidelined and treated with contempt and passed over for promotion. New MBAtype staff turned up and arrogantly thought they knew everything already. So much time was wasted by the “quiet ones” testing out the hare-brained ideas of the MBA types. I’m all for innovation, but not at the expense of stability and at the expense of risking the viability of the business that is at the core of Enron. A business plan is something alien to many of the so-called smart MBAs who joined Enron since the mid ‘90s. Don’t forget the main failing here is the arrogance of senior and middle management. Even now they treat questions from Wall Street analysts or investors with contempt. Don’t forget why they got rid of the good assets (including people). It was to allow the stock to participate in the tech boom. They wanted a slice of the ratings that Cisco or MSFT had with PEs of 50, 60, or 70 instead of 20-30. It was the easy way to get the stock price to rocket - tell everyone you’re now a tech company - no assets, just ideas that maybe might make some money a long time into the future. Until 2000/2001 you got a higher rating for promising money than making money and this was the obvious strategy of senior management. They got out at the highs - selling shares and exercising options like crazy in 2000 and 2001. Companies run like this deserve to die, but I hope it doesn’t for the sake of all the immensely talented people who work here.

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29,153

10/31/01

if the glove fits

Re: Enron Corp - View from the Inside

$13.90

Broadband was a bust but the investment was only around a billion dollars. A bigger bust was buying assets overseas. Over $6 billion in Latin America, Asia, and Europe. This wasn’t Skilling’s idea. It was Rebecca Mark’s. As was Azurix. It’s these poor investments that are Enron’s undoing. Too much capital tied up in very poor investments. Without these, Enron wouldn’t be in the position it’s in now, even with broadband. Skilling realized this and tried to sell the portfolio, but not soon enough. It was Rebecca Mark that brought down the house, IMO, not Skilling. 29,174

10/31/01

citywhizkid

Re: Enron Corp - View from the Inside

$13.90

You are 100% right of course. At this time it’s easy to blame Skilling for everything. Enron International was a vehicle for making Rebecca and others in EI rich. I mean, they would go abroad to exotic South American countries, meet a few politicians, and visit a few power plants then decide on the basis of the projection from a bunch of their over-worked analysts/associates/managers to build a new power plant or build a new gas pipeline. And guess what? They got paid in EI (until about ‘97) something like 5% of the deal value as a bonus to be shared amongst the staff who worked on the deal! The deal value was arrived at by some (optimistic) view of long-term gas or power curves, which nobody could argue with, especially not external auditors. How can you be paid a bonus over 1 to 3 years that is based upon a deal that has not even made any money and won’t accrue all that profit for maybe 20 years? This encouraged EI to sign up for some lunatic ideas. I suspect you are right in your suggestions about Skilling not being to blame for Enron’s difficulties. Having said that, when the broadband venture was announced in Dec. ‘99 or Jan. ‘00, they had plenty of time to downgrade forecasts in light of the fallout in the Internet sector. They could have limited the lost investment to much less if they had only taken things more slowly and less based on hope. Don’t forget that Skilling and Rebecca were arch rivals for the top job, so in a way, Azurix was set up for Rebecca as a separate company that then gave Skilling a free hand to take the top job at Enron. 29,459

10/31/01

floridaisagas

Re: Enron Corp - View from the Inside

$13.90

citywhizkid - you are absolutely right about incredibly perverse compensations systems at EI. Imagine paying someone a bonus representing a share of 15 years of power plant operations before the plant is ever even built! But remember that foreign portfolio problems weren’t the result of just EI poor choice of countries and locations (Hainan Island, Puerto Quetzal); Enron also never compensated plant managers based on the actual operations of the plants. Not a single executive’s bonus was tied to true value creation at the project level. The result - steep deterioration in the condition of the plants where partners have not forced ENE’s hand. The problem with Enron’s mark-to-market accounting is that the company limited it to Skilling’s segments, never owning up to the huge imbedded losses in the international side, or the hundreds of millions of wasted dollars spent competing unsuccessfully in foreign countries - all of which was capitalized in the famous “snowball.” They even had the chutzpah to capitalize interest on the aggregate snowball amount. It really does boggle the mind!

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29,495

10/31/01

floridaisagas

Re: Enron Corp - View from the Inside

$13.90

One of the things a shareholder expects from an accounting (or law firm, for that matter) is independence. AA worked hand-in-hand with ENE to generate a lot of the accounting games, always either justifying the unjustifiable by recourse to form over substance or by “immaterial” individual deviations from sound accounting practice which in the aggregate were hugely important allowing Enron to levitate its earnings. By the way, the real long-term problem with absolute control by a company over its outside accountants and lawyers is that instead of being forced to solve operating or strategic problems, ENE could merely make them “go away” by not disclosing them. The accountants facilitated Enron not being the company it could have been, given all of its talented people. 29,548

10/31/01

citywhizkid

Re: Enron Corp - View from the Inside

$13.90

My numbers about bonuses are estimates (I hears up to 8% of deal value/ purported profit), but the general idea is the same. Identify an energy project involving building energy assets/projects (e.g. new gas pipeline, new LNG terminal, new power station, etc.), using the reputation of Enron’s name to get a foot in the door. Then persuade everyone in the company how much the deal is worth based upon some bogus extrapolation of current forward curve of energy prices and exchange rates, then walk away come bonus time with a hefty chunk of that “so called” profit. It is ridiculous that EI had the power to insist that they got paid a slice of the (inflated) profit up front instead of accruing the bonus as and when the profit materialized year by year. This was not capitalism, but greed gone crazy. I mean they were getting paid knowing that there were big political risks and even exchange rate risks to the deal. They tried to mitigate these with complex legal work and getting the government to take a stake in the deal and pointing to numerous “exit strategies.” They didn’t really care about the project after they got paid, out of shareholders’ pockets. Azurix is an example of this activity in a purified form. You can see what that did to shareholder value directly, no hiding behind partnerships there. I think you will find that the interest rate that they used to discount the cash flows of the project in Latin America or Asian countries did not take into account credit risk. If I am not mistaken, the idea was to use the riskfree interest rate to discount, which inflated the deal value. There were hundreds of other tricks, so many that two different MBAs would come up with wildly different values for the same deal! External auditors were very much in bed with senior management in EI, just giving an impression of carrying out their due diligence. The deals were fiendishly complex so a lot of what they signed off on was taken as a leap of faith. I mean, they had no hope in hell of justifying that the power or gas curves should be any different, as the models depended on so many external variables. One of the analysts just had to increase the assumption for inflation in gas/power prices by 0.1% to generate an extra few million of deal value, the same so-called “deal value” that they got paid bonuses on. 29,557

10/31/01

citywhizkid

Enron Corp - View from the Inside

$13.90

I heard managers at ENE relished the complexity of deals knowing that nobody has the depth of knowledge to argue a strong case against the purported value. That is mark-to-market accounting the innovative way! $

November 1: Merrill Lynch downgrades Enron from NT Accumulate/LT Buy to NT Neutral/LT Neutral.

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31,547

11/02/01

tomsen90

Re: Partnership: LJM Cayman LP?

$11.30

There is a story behind LJM. You see, the 3 letters represent the first initial of Andy Fastow’s wife and his two children. 33,543

11/05/01

curly shemp and joe

ENE will be a B-School Case Study . . .

$11.17

. . . Hopefully it will help others avoid utter stupidity and incompetence. 34,572

11/06/01

imgoingbroke99

Hope you’re happy, my retirement ruined

$9.67

I am financially ruined by this meltdown. Why some people take pleasure in that is beyond me. 34,631

11/06/01

poor guy here

Show some compassion

$9.67

I will, but the fault is still their own - buyer beware. 34,892

11/06/01

citywhizkid

Where are You Now Most Innovative?

$9.67

We now know in what regard Enron was most innovative for five years in a row. Most innovative in accounting, pumping the stock, arrogance, short-termism, and betrayal. Last one to leave the office, please turn out the light as an energy conservation measure! 35,067

11/06/01

cyberpolice1999

ENE Cooked its Books

$9.67

Nobody knows how bad the situation is. Once it cannot serve its debt, it will be forced into Chapter 11. Then there won’t be much left for shareholders (if anything). $ $ $

November 7: AG Edwards downgrades Enron from Hold to Sell. ENE closes at $9.05 November 8: Enron announces that it overstated earnings for past four years by $600 million since the financial activities from Chewco Investments, JEDI, and LJM1 should have been included in Enron’s consolidated statements. ENE closes at $8.41 November 12: Enron employees’ 401(k) retirement plans unfrozen, stock price closes at $9.24 per share. Prudential upgrades Enron from Sell to Hold.

48,085

11/13/01

utlonghornsrule

Re: Lay did the right thing turning down

$9.98

Ken Lay broke the law, repeatedly and willfully. He needs to go to prison. He is despised at Enron. He can’t even walk the floors there. It is mutinous, and that is what happened this afternoon. He now has 7x24 police security, we are told. He will never be able to go to the mall without bodyguards, it seems. Such is the life of a hated man.

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50,517

11/19/01

utlonghornsrule

Lay continues to ... out of his mouth

$9.06

Just canceled the Enron Christmas party so he wouldn’t have to show up for his own party with armed bodyguards. He lied and said employees were ambivalent. Trust me, nobody believes a word he says anymore. People would have enjoyed the company spending a few dollars on them and giving them a chance to laugh and dance a bit, especially since most of us adore our coworkers. Ken Lay is the sorriest sack of garbage I have ever been associated with, a truly evil and satanic figure. $ November 20: Enron fires employee Clayton Vernon for posting anonymously on Enron’s Yahoo! message board using the ID “utlonghornsrule.” Mr. Vernon, who holds a master’s degree in economics from the University of Texas, made hundreds of posts on the message board in 2001. He was fired for posting from his desk at Enron’s Houston headquarters, which is a violation of Enron’s computer and network policy. Enron was able to trace the posts to Mr. Vernon using internal software. $ November 21: Goldman Sachs downgrades Enron from Recommended List to Market Perform. CIBC World Markets downgrades Enron from Buy to Hold. ENE closes at $5.01 $ November 28: Enron bonds downgraded to junk. UBS Warburg downgrades Enron from Strong Buy to Hold. ENE plunges to 61¢ per share (from $4.11 on November 27). $ November 29: RBC Capital Markets downgrades Enron from Buy to Market Underperform. ENE closes at 36¢. $ December 2: Enron files for Chapter 11 bankruptcy protection. $ December 3: Enron fires 4,000 employees. $ December 12: Congress begins hearings on the collapse of Enron. $ December 13: Arthur Andersen executives testify before Congress that they warned Enron about possible illegal acts. $ January 9: A criminal investigation of Enron is opened by the Justice Department. $ January 10: Final day of trading for Enron on the New York Stock Exchange, stock price closes at 67¢ per share. Arthur Andersen auditor admits to shredding Enron documents. $ January 15: Arthur Andersen fires the lead partner for the Enron account. $ January 16: Enron is delisted from the New York Stock Exchange, becomes Over-the-Counter Bulletin Board stock with ticker symbol ENRNQ. $ January 23: Ken Lay resigns as CEO. $ January 25: Clifford Baxter, a former Vice Chairman for Enron, is found dead in his car at 2:30 a.m. He died from a gunshot wound to the head. A suicide note is turned over to police by his wife. 213,621

1/25/02

peach74306

Re: Enron Exec Killed ... found in car

$0.47

Clifford Baxter - former Vice Chairman of Enron has committed suicide. We will keep his family in our prayers. $ $ $ $ $ $

January 28: Class action lawsuits are filed against Enron by Enron employees for losses in their 401(k) accounts. January 29: Stephen Cooper becomes Interim CEO for Enron. February 1: The White House is ordered by the Justice Department to keep all documents related to Enron. February 7: Jeffrey Skilling testifies before Congress. Andrew Fastow invokes the Fifth Amendment. February 12: Ken Lay invokes the Fifth Amendment. February 14: Sherron Watkins testifies before congress that Ken Lay was “duped” by Skilling and

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Fastow. ENRNQ closes at 25¢, down 99.69% from one year earlier. Enron’s market capitalization is $186 million, down from $59.5 billion one year earlier. $ March 14: Justice Department indicts Arthur Andersen for shredding paperwork from Enron audits. $ April 8: Enron shareholders file a class-action lawsuit against J.P. Morgan Chase, Citigroup, Credit Suisse First Boston, Boston USA, Bank of America, Merrill Lynch, and Lehman Brothers alleging that the bankers inflated Enron’s stock price by issuing “buy” recommendations for Enron when they were aware of Enron’s financial problems. $ April 9: David Duncan, Arthur Anderson’s lead auditor for Enron, pleads guilty to obstruction of justice for shredding Enron documents. $ April 11: Clifford Baxter’s suicide note is released by the Sugar Land Police Department. It reads: “Carol, I am sorry for this. I feel I just can’t go on. I have always tried to do the right thing but where there was once great pride now it’s gone. I love you and the children so much. I just can’t be any good to you or myself. The pain is overwhelming. Please try to forgive me. Cliff.”

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