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Enron, once a high-flying blue-chip trading around $90 a share, and listed by Fortune 500 as the seventh largest company in the United States, fell to levels of closer to $0.20 in only a matter of months. Billions of dollars in stock market value disappeared in only a fraction of the time it took to make them.
At the company's height, Enron had 21,000 employees and was the largest natural gas merchant in the country.
As Enron 'became' a penny stock, I personally received numerous questions and e-mails from subscribers of my newsletter about the viability of the penny stock as an investment. Traders thought they were getting a deal by gobbling up shares of a company for pennies, when those same shares were worth nearly $100 only a year earlier.
Whether you bought in at 25 cents or $90, those shares are now worthless.
This reinforces a lesson that many bargain hunters choose to ignore again and again: It may have already lost 99% of its value, but it CAN go lower, and it very often does.Too frequently traders say to themselves, "Really, how much lower could the stock possibly go?" Using that as the extent of their research, they invest feeling secure, and just as if they had bought at $50 or $20, they lose 100% of the money they put in.
Enron's former Chairman, Kenneth Lay,
testifies after Enron's collapse.
I was pleased when Kristen Hays from the Associated Press contacted me for my comments on Enron. I was able to use the interview as a forum to provide my position on the entire Enron situation.
Here are some of the comments published by the Associated Press. This interview was picked up by several dozen media sources, and was published on several continents:
So, what happened with Enron anyway? To make a long story short, they cooked their books. Vastly understating billions in debt and liabilities, while using accounting obscurities to polish the look of their financials, they set themselves up for a tremendous collapse.