HOUSTON — The financial roller-coaster ride for Enron Corp. is gaining speed.
After dropping to a nine-year low a day before, shares of the nation's largest natural gas and power marketer rose 25 percent on Wednesday to close at $13.90 amid speculation the Houston-based company was a strong takeover candidate.
But shares then fell 5 percent in extended trading after the company's announcement that the Securities and Exchange Commission has opened a formal investigation into apparent conflicts of interest in dealings the company had with partnerships led by its former chief financial officer, Andrew Fastow.
The company, in a news release late Wednesday, said it created a special committee headed by University of Texas law school dean William Powers to respond to the investigation. Powers also was elected to Enron's board of directors.
"I have asked the board to take this action to address fully and forthrightly investors' questions and concerns," said Enron chairman and chief executive Kenneth L. Lay. "We will also make every appropriate public disclosure during the course of the SEC's investigation."
However, Duane Grubert, an analyst with Sanford C. Bernstein and Co. in New York, said Enron still has much to do to restore investor confidence.
"With (stock) values this low, you've got two camps of investors: guys that hate Enron and guys that want to be cautiously attracted to Enron," Grubert said. "It's led to the trading range being irrationally low and shares being oversold. It's not something the company wants."
Enron's stock is off 60 percent since the company reported a $638 million third quarter loss just over two weeks ago, dragged down by a one-time charge of $1.01 billion attributed to various losses.
Some of these losses have been tied to partnerships managed by Fastow, who was ousted last week.
Earlier this week, Moody's Investors Service downgraded the company's long-term debt and warned of possible further downgrades.
Since reporting its disappointing third quarter losses, Enron has been negotiating with banks to establish new credit lines.
Carol Coale, an analyst with Prudential Securities Inc. in Houston, said Wednesday's stock price surge, after two weeks of selling, was likely a reaction to a report in The Wall Street Journal on rumors of a possible takeover of Enron.
Others may be buying figuring the stock has hit bottom, she said.