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Quote of the Day
“…unintelligible footnotes usually indicate untrustworthy management. If you can’t understand a footnote or other managerial explanation, it’s usually because the CEO doesn’t want you to. Enron’s descriptions of certain transactions still baffle me.”
-Warren Buffett in his 2002 Berkshire Hathaway Shareholder Letter. On this day in 2001, investors would realize why Enron made those descriptions so unintelligible.
December 2nd – This Day in Stock Market History – Enron Declares Bankruptcy
December 2nd, 2001 – At 4:28 am Enron officially files for bankruptcy.
One of the largest corporate scandals is history had its dramatic conclusion on this day in 2001. Enron, once #7 on Fortune’s top 500 list, was now worth nothing. In mid 2000 Enron’s stock price reached as high as $90. It closed November 30th at 26 cents, wiping out billions in wealth.
At the time, Enron had $63.4 billion in assets, giving it the honor of being the nation’s largest bankruptcy at the time. (It would be surpassed by the WorldCom bankruptcy a year later)
Jeff Skilling, Enron’s CEO would serve 11 years in prison. Andy Fastow, Enron’s CFO, would serve about 5 years in prison.
December 2nd, 2001 was a Sunday. The markets would open the following day selling off on the shock. The Dow Jones Industrial Average would close down 1.16%, 114.6 points.
Best December 2nd in Dow Jones Industrial Average History
2008 – Up 3.31%, 270.00 points.
Worst December 2nd in Dow Jones Industrial Average History
1932 – Down 3.64%, 2.11 points.
Reads of the Day
Buffett has a few other comments about Enron in his 2002 shareholder letter. Indirectly, Enron’s problems gave them a very good deal on a large pipeline purchase they completed that year. (A lesson in the value of having cash on hand in order for be able to take advantage of the situation)
There are 2 excellent works documenting the story of Enron’s rise and fall:
The Smartest Guys in the Room (As either a book or Movie/Documentary)
and
Both give amazing detail of the build up and collapse of Enron. And both can be found for a penny used on Amazon – well worth your time.
<– Go To Previous Day: December 1st, 1998 – Oil giant Exxon agrees to purchase Mobil for $80 billion.
Go To Next Day: December 3rd, 1997 – South Korea and the IMF reach a deal for a $55 billion aid package. At the time it was the largest aid package in history. –>
