Energy trader Enron is tottering at the edge of one of the biggest corporate collapses in US history after its rescue by rival Dynegy blew apart.
Shares of Enron, which was only recently ranked seventh on the Fortune 500 list of the biggest US corporations, slumped 85 per cent to an all-time closing low of 61 cents yesterday.
Major credit rating agencies cut their ratings on Enron's bonds to junk status, triggering expectations a company that was a darling of Wall Street just a year ago will be forced into bankruptcy.
The plunge in Enron's fortunes shook financial markets worldwide, rocking the London Metal Exchange and weighing on US stocks as it left creditors, such as banking giants JP Morgan Chase and Citigroup, facing substantial losses.
The latest disaster for Enron marked a new low in a free-fall that began with a $638 million third-quarter loss six weeks ago.
Surprise disclosures, including the admission it overstated earnings by almost $600 million since 1997 and kept huge debts off its books, led investors to rapidly lose faith in a company valued at almost $80 billion a little more than a year ago.
After trading yesterday, Enron's market value was barely $450 million. A US regulatory inquiry into its off-balance sheet dealings and the unexpected departures of a chief executive in August and a chief financial officer in October helped fuel the fall.
Enron "entrapped the sophisticates," said Mr Robert Stovall, senior strategist at Prudential Securities, referring to the once-unbounded admiration for Enron by institutional investors. "I think this is going to become a classic case".