From the WSJ online:
Enron Lives as Penny Stock
Some Optimists Carry a Torch
For the Embattled Energy Firm
By JOHN R. EMSHWILLER
Staff Reporter of THE WALL STREET JOURNAL
On a lackluster day for the Dow last week, the average of elite stocks fell by a minuscule 0.14%. But one well-known stock saw its price soar 25%, which would have easily made it one of the day's biggest gainers on the Big Board -- if it were still there.
The hot stock belonged to Enron Corp. Yes, that Enron, the once-proud Houston energy giant that over the past year has set the standard for 21st-century corporate scandals. The stock rose only to 15 cents a share from 12 cents in the over-the-counter market, where it trades with other penny stocks in the "Pink Sheets." And the pinks are a long way from the blue-ribbon days of as recently as early last year, when Enron stock fetched around $80 a share on the New York Stock Exchange.
Still, 15 pennies is a pretty lofty level for a company in bankruptcy-court proceedings, under numerous federal investigations and whose stock has been declared worthless by Enron's own top management.
Following Enron's December filing for bankruptcy-law protection in New York federal court and subsequent delisting from the Big Board, the company publicly buried its stock. A Feb. 12 Securities and Exchange Commission filing, and companion news release, made it all clear. "Enron believes that its existing equity does not and will not have value and that any Chapter 11 plan of reorganization confirmed by the Bankruptcy Court will not provide Enron's existing equity with any interest in the reorganized debtor," the company said.
Company officials have publicly repeated this warning many times. To punctuate the point, Enron even closed its investor-relations department.
But none of this seems to have discouraged a hardy band of stock-trading optimists. In fact, such active trading of a bankruptcy-battered stock has happened before in other cases, illogical though it may be. Most days, Enron stock trades one million to two million shares and some days much more; last week, it traded more than six million shares on one day and nearly nine million the next. Tuesday, the stock traded at around 12 cents a share on a volume of more than three million shares.
Enron spokesman Mark Palmer declines to speculate on what is fueling the continued interest in the company's stock, although he reiterates that management still believes the shares, more than 700 million of them, have no value. He says he still gets calls from new shareholders or would-be shareholders asking about the company's prospects.
He tells of a recent call from one man, who kept asking, "Should I buy the stock?" The man asked the same question half a dozen times as Mr. Palmer kept repeating Enron's position that the stock had no value. "He asked the question so often that I thought he might be from the SEC, calling undercover to see if we were privately touting the stock," Mr. Palmer says with a laugh. He adds that he doesn't know whether the caller ever invested in Enron.
There is a rich irony in the company's inability to kill off its common stock. For years, Enron's top management, all of whom have now been removed, did a splendid job of pushing up its price. Indeed, allegations that Enron's top brass fraudulently manipulated company financial results to boost the stock price have produced dozens of shareholder lawsuits and contributed to federal criminal charges against two former senior officials. A Justice Department criminal probe continues.
So, why is Enron stock refusing to die?
There are a variety of possible explanations. Start with the Big Dog theory, involving what Wall Street calls a "dead cat bounce." Big Dog is the online moniker of Mike Nichols, a former textile-coatings salesman from New Jersey who became an Internet stock-trading celebrity during the bull market of the late 1990s. Mr. Nichols, who was profiled in this newspaper in 1999, specializes in penny stocks, so named because they usually trade for less than $1 a share.
Mr. Nichols doesn't challenge management's assurances that Enron's stock is dead. He just believes that other people do. "They think that a company that big has to get bailed out. There is always hope," he says.
He has been buying and selling Enron shares, off and on, for nearly a year, and estimates he has made about $30,000. Since the stock's official February burial, it has gone as low as eight cents and as high as 33 cents. He adds that, with all the woes and scandals at big corporations, this has been a very good year for trading distressed securities. Mr. Nichols says he has traded stocks such as WorldCom Inc., Conseco Inc. and Lucent Technologies Inc. "They've been falling out of the trees, dropping like flies," he says. (As for WorldCom, which is also operating under bankruptcy-law protection and the cloud of criminal scandal with management holding out no hope for a revival of common stockholders' fortunes, its shares have been busily trading in recent months in the under 30-cent range.)
A certain indomitable optimism does show itself at the Enron message board on the Lycos-Raging Bull Internet stock-chat Web site. "Before too late get in," an Enron fan with the moniker "kimprovcomeback" wrote in a posting Nov. 18. By last Wednesday, caught up in the enthusiasm of the latest Enron minisurge, the same writer was predicting that the stock could top $1. Under the right circumstances, "it is all a fresh new start," he (or she) argued.
The Enron bulls were tested by the company's February announcement but managed to see their way past it. Some argued that Enron executives were simply being too conservative in estimating the company's assets versus its liabilities. Some blamed the media for making the Enron announcement sound more negative than it really was.
Others thought management was just trying to protect itself from new charges of hyping the stock. "Guys it is just a disclaimer statement in case things don't go as expected. Enron does not want to have another class-action lawsuit on their hands," wrote "luuuuucy." A poster named "oktoberpest" suggests that everyone "keep the faith. Its just the mother of all shakeouts nothing more."
Apparently enough people have kept the faith to keep the stock going, despite the efforts by some to throw in a dose of reality. "How soon everyone forgets the common is dead in this company. What hype and b.s. Shame on you people!" lamented "hedgeurbets" in a message last Wednesday on Raging Bull.
Perhaps "stueeew," in a message posted Feb. 13, had the best explanation for what has been happening: "Investing in Enron is a bit lick smoking cigaretts. You know it's gonna kill you in the end, it sez right there on the packet! But ya keep smoking 'cause you're an addict."
Write to John R. Emshwiller at john.emshwiller@wsj.com
Updated November 27, 2002 |
