Enron Corp. - University of California | Office of The President

189. In 11/99, rumors circulated that Enron was having difficulties making its 4thQ 99
"numbers" due to problems with Enron's EES and Indian operations. As a result, Enron's stock
began to weaken and fell to as low as $34-7/8 on 11/23/99. To help support Enron's stock price,
Enron's bankers, at Enron's behest, issued a series of extremely positive reports on Enron assuring
investors that Enron's business fundamentals were strong, that Enron was on track to meet or exceed
forecasted levels of earnings and that any price weakness in Enron stock should be viewed as a
buying opportunity.
190. On 11/26/99, JP Morgan issued a report on Enron. It rated Enron a "Buy" and
forecast 00 EPS of $1.41, and stated:
ON SALE FOR NO REASON; BRICKS TO BRAINS STRATEGY INTACT
We are reiterating our BUY recommendation.... In our opinion the recent price
weakness is unwarranted and presents a superb opportunity to get into one of our
top growth names. Enron has done a fantastic job of exiting slow growth, assetintensive
commodity businesses (bricks) and refocusing on intellectual capital-based,
higher growth opportunities (brains).
* * *
Enron has a virtually unassailable lead in the domestic wholesale energy markets.
Retail business continues to thrive ....
* * *
Enron Energy Services (EES, the retail business) should be one of the primary
earnings drivers over the next 12 to 18 months. EES is on track to turn profitable on
an EBIT basis in this quarter.... It should easily sign the $8 billion in contracts in
1999 that Enron committed to at the beginning of the year. Marquee deals have been
struck with:
Simon Properties, announced $1.5 billion+
Owen Corning, announced $1.1 billion+
Suiza Foods, estimated $400 to $500 million
The speculation continues to be wrong and Enron continues to be right. The stock
has been plagued by a litany of unsubstantiated reports. Just over the past few
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