This article about the current near-bull market in technology stocks reminds me a bit of the boom times during which Enron Broadband Services (EBS) was launched and during which Enron Corp. stock hit its highest price. As the author of the article comments, referring to certain current technology stocks, “these stocks are partying like it’s 1999.”
Immediately after the January 2000 Enron Analyst Conference, Enron’s stock price rose significantly. I have always found it deceitful that the federal prosecutors of the Enron Task Force (ETF) tried to imply to the jury, during the EBS trial in 2005, that the value the market analysts attributed to EBS was unusually high. While we can always debate what we think the “correct” market valuation of EBS’ contribution to Enron was back in January 2000, there is no basis at all to imply that the valuation of EBS was unusual for the times.
McKinsey & Co., the international consulting firm, prepared a presentation and report for Enron back in 2000 in which the consultants compared EBS to its primary competitors as well as to a number of other firms in the communications industry. From my reading, based on a comparison of actual assets deployed and other measures, EBS was dramatically under-valued relative to other firms in the industry. As many people have pointed out, based on the technologies that EBS pioneered, technologies that today dominate the industry, EBS was grossly under-valued in early 2000. It may be accurate to say that EBS’ association with Enron Corp. pulled the EBS valuation downward rathering than implying that the existence of EBS pulled the Enron Corp. stock price upward.
By the way, for anyone still skeptical about the value of EBS back in early 2000, consider a simple fact about the EBS trial. The prosecutors at that trial were unable to deliver a single market analyst to the witness stand to testify that EBS was over-valued or even that the analysts’ recommendations about the overall Enron stock value was based in any way on EBS. For a case based completely on the claim that EBS executives “hyped” the value of EBS, such a lack of witnesses should have caused the case to be tossed out by the judge before trial. Instead, the federal prosecutors wasted tens of millions of taxpayer dollars on taking the case to trial where it ended in a humiliating defeat for the Feds.
[Leo Thompson is a frequent contributor to Cara Ellison's Enron Online: The Enron Blog and will also be contributing to this blog from time to time.]