4 ms·

What’s your definition of a “real business”? Enron had revenue of over 100bn, 30k employees, and delivered actual products and services for many years. How’s th

• danielmarkbruce 5y ago
  In my mind there are multiple types of "not real" business. Two obvious types: i) A business where the true state of it is being hidden to raise money to keep it afloat and it's not sustainable without raising said capital. Enron did this, raising lots of debt financing. Theranos did it with equity. ii) A business which isn't sustainable over any time period without external money to keep it afloat. It need not be fraud, it could just be stupidity on part of investors, executives. Many internet bubble businesses were this type of "not real". Enron had a lot of businesses under the corporate umbrella. Some of them were real (they owned hard assets, pipelines, energy generation assets). However, a lot of the revenue from other businesses was fake - derivatives revaluation accounting tricks (like, "hey this derivative contract is now worth $50 mill more because of some analysis we did, up goes revenue"), debt hidden via special purpose entities, and other similar things. The "not real" part of Enron was so big that it's debts brought down the rest of it. The chapter 11 process sold the real assets and the creditors got some money back and some employees stayed with those business.