Shares of Enron Plummet 21%

Shares of Enron Corp. set a 52-week low Monday on word that the Securities and Exchange Commission had asked for information about a complex series of financial transactions between the Houston-based energy giant and an investment partnership tied to a company executive.

Enron, the world’s largest energy trader, said it had voluntarily provided information on “certain related-party transactions” that had been previously disclosed to the SEC.

“We welcome this request,” said Kenneth L. Lay, Enron chairman and chief executive.

“We will cooperate fully with the SEC and look forward to the opportunity to put any concern about these transactions to rest,” he said.

The SEC request is the latest in a parade of bad news for Enron, which has seen investments sour in telecommunications, retail electricity sales and water.

Investors have battered the company’s stock, which once sold for nearly $85 a share in the last year, and many have criticized Enron’s stingy meting out of financial information. But several Wall Street analysts remain upbeat on the stock, noting that the bulk of its businesses continue to thrive despite the growing economic downturn.

In August, Enron Chief Executive Jeffrey K. Skilling, one of the main architects of the company’s strategy of shedding physical assets in search of trading profit, stunned Wall Street by resigning.

Skilling cited personal, family-related reasons, but later he acknowledged that the precipitous plunge in the company’s stock price contributed to his departure.

On Monday, Enron shares plunged $5.40, or nearly 21%, to close at $20.65 on the New York Stock Exchange.

Enron’s stock has lost nearly 40% of its value in the last week since it reported a surprise third-quarter loss of $618 million after $1.01 billion in charges reflecting the costs of recent failed investments.

But the charge also included $35 million related to what Enron described only as the “early termination during the third quarter of certain structured finance arrangements with a previously disclosed entity.”

In a conference call with securities analysts about the earnings, the company mentioned that it had repurchased 55 million shares as part of the dissolution of its participation in the transactions.

But investors were stunned when stories last week in the Wall Street Journal detailed that the transactions were with a limited partnership organized by Andrew S. Fastow, Enron’s chief financial officer, and that Enron had whittled $1.2 billion off its shareholder equity as it repurchased the shares and canceled a $1.2-billion note it had received from the partnership. Shareholder equity now stands at $9.5 billion.

The limited partnership, called LJM2, and Fastow reaped millions of dollars of profit through complex hedging transactions that involved Enron assets and stock, the Journal reported.

Lay said the transactions were reviewed by auditors and lawyers inside and outside the company and that the company board was fully informed.

A shareholder lawsuit charging that Enron’s directors violated their fiduciary duty already has been filed in Texas state court.

Many companies set up limited partnerships for tax purposes, but it is unusual to allow company executives to run them, analyst say.

Investors also are upset by the unusually zealous way that Enron has guarded financial information, making it difficult to analyze the company’s complex web of businesses.

And many are not confident that all the bad news has been released.

Analyst M. Carol Coale, who follows Enron and other energy companies for Prudential Securities in Houston, downgraded Enron to a “hold” from a “buy” rating Monday out of such frustration.

Coale said she has been getting misinformation or no information out of Enron.

But Bob Christensen, energy analyst with First Albany Corp., said that despite Enron’s recent difficulties, the bulk of the business remains strong.

“I continue to tell investors that 70% of this company’s business is growing at a 26% rate, and that was in the third quarter when this country had a very sharp economic slowdown going on,” he said.

Investors are panicking because of a “bad news story that doesn’t reflect reality,” said Jon Kyle Cartwright, senior energy analyst with the Raymond James & Associates brokerage firm in St. Petersburg, Fla.

“They are the world’s largest energy trader, and they are very good at that,” Cartwright said.

“The reality is that everything is fine here,” although more charges, perhaps $500 million worth, are expected in the next few quarters, related to businesses that Enron is selling.