It showed tremendous profits in comparison to the whole hardly surviving Enron.
In fact, such profits were real on share price but illusory in the reality. As Skilling’s Enron in the near future, this company ended in the bankrupt scandal. In the case of Enron Oil, double-entry bookkeeping and hiding bank accounts (the case of Apple Bank) were used. Moreover, Borget and Mastoeni practiced creating third companies (hedges) in the same manner Fastow did later in order to turn Enron’s losses into gains. As a result of such mostly illegal practices, profits were simply shifted without their real existence.
In fact, all this was made in order increase stakeholder value of Enron for Wall Street and banks. Finally, the gap between economic and accounting reality became clear and Enron Oil collapsed as the business environment did not accept the oil prices that were needed for the entity’s survival.
The capacity of Enron’s executive board to create outstanding financial operations was impossible to ever appear without an implicit agreement from other actors in the market. In conditions of stakeholder value’s prevailing, Enron’s activity was favored by Wall Streeters and “momentum investors.” And so, they significantly helped Enron to “make ducks from dogs.”
On the one hand, financial analysts as managers of all companies’ stakeholder shares could become rich if only they remain bullish. In fact, their profits were enabled by breaking their independence from bankers. And so, investment analysts appreciated every company trying to increase its price as a short-term perspective. So, they welcomed Enron for its exceptional disquietude on meeting and beating earnings-per-share estimate.
On another hand, the emergence of bull market with financial analysts and oriented on stakeholder value companies like Enron created the new type of investors called “momentum.” As new rules on the market