Enron Stock Value Controversy
Doughboy has raised a question about the $3 Billion Bid
for the Dabhol Power plant in India.
Mumbai, Jan. 19 (Bloomberg) -- Total Fina Elf SA, Europe's biggest refiner, plans to bid for a $3 billion Indian power plant controlled by Enron Corp., the U.S. energy company at the center of the biggest-ever bankruptcy proceeding, quote.bloomberg.com
Doughboy raised the point that Enron only had 65% interest in the operation. A more careful reading of my previous post will reveal I said exactly that.
The big questions facing share/stake holders of Enron common stock is will the stock retain some residual value and if so, how much? In my earlier message I placed what I considered to be a "Low Ball" estimate of 10% of stock holders equity (SE) of $9.58 Billion reported in the most recent filing by Enron to the SEC. We all agree that the reported SE has been significantly eroded by recent events.
No one, to my knowledge has put a valid, verifiable number to the amount of damage or what may remain following.
This is how another poster attempts to explain the situation. His explanation is as good as any I've seen.
It was originally posted on an MSN board and passed on to me on a Raging Bull CLB01002 message board. I have yet to respond to it. I'm doing them one at a time....
QUOTE:
“By: greg dodson
25 Jan 2001, 10:31 PM EST
O/T: To SargeK, from my MSN board:
If you can respond I’ll cross-post - GD
I have a rationale for the forecast that stockholder equity will be retained and not retired. I would appreciate comments, especially from SargeK if possible. Thank you very much for forwarding his excellent posts.
Previous Chapter 11 cases mentioned were quite different from ENRNQ. In this case assets are greater than liabilities. The value of these assets is the question that will determine how much equity remains. The assets are not perishable by nature or fashion and are, for all practical purposes, commodities. Industrial assets such as power generation and transportation devices that have current technology and are well maintained retain value by their very nature of basic utility.
Competent management and fair judicial oversight are fair assumptions in the proceedings with ENRNQ. I believe this to be the case because of fair and competent performance demonstrated by Judge Gonzalez, the sale of the trading operation, and the management qualities of those who we know are being considered for the next phase of ENRNQ's management positions. Getting a fair to excellent price, under the circumstances, for ENRNQ's assets is essential to shareholder value and I believe that management and judicial oversight in this case merit optimism.
"Stakeholder" is the term being used to describe those that will benefit from current restructuring. Shareholders are definitely included in that definition and are not to be excluded, regardless of the desires of creditors. Judicial oversight has the task of being fair to ALL stakeholders, including the shareholders. I do not believe ENRNQ's creditors have any concern for shareholder interests or ENRNQ survival but judicial oversight does. Perhaps of more importance than CEO selection is who will represent shareholder interests in the position of Chairman.
I believe that the only ones who will benefit from employee and shareholder class action legal action will be attorneys. On closer examination of ENRNQ actions with regard to claims of fraud and deception it will become apparent that they are pretty much in the black legally, but not morally. Legally is where the money is.
My estimation of residual value is between $1.20 to $2.75, depending on how effectively management disposes of assets and how damaging legal liabilities prove to be. Speculation of valuation higher than $3.00 at this point, I believe, is not realistic.” UNQUOTE
ragingbull.lycos.com
Comment: Enron has an exit plan from Chapter 11. I think it will be successful, sooner perhaps than many think. I posted the Dabhol situation; because I think that sale (bids due o/a Mar 1, 2001) will expedite departure from Chap 11. Mr Lay thought 'Dabhol' was a signficant problem. Sell of this asset would contribute immeasureably to the immediate cash/liquidity problem.
BOTTOM LINE: Many people disagree with my assessment that some amount of residual value of common shares may emerge from Chapter 11. They may be wrong or I may be wrong. I have attempted to make the case of what I based my decisions on. If you wish to disagree. So be it.
A couple of other points: Mr Lay exercised profitable stock options to provide funds to pay off loans collateralized by Enron stock which was declining in value.
He still retains control of almost 3 million shares, hardly the action of a man being accused of dumping while misleading others. The hoopla regarding the employees being locked out during the stock price decline is grossly misleading. Fact is the stock declined very little during the period where plan administrators was being changed. Employees had been notified months in advance that Plan Administrators would be changed and had plenty of time to make adjustments if they so desired. |
