how enron used spvs
the massive financial collapse of enron corp in 2001 is a prime example of the misuse of an spv enron was a supposedly booming energy company based in houston texas enron s stock was rising rapidly and the company transferred much of the stock to a special purpose vehicle taking cash or a note in return the special purpose vehicle then used the stock for hedging assets that were held on the company s balance sheet 23enron guaranteed the special purpose vehicle s value to reduce risk the value of the special purpose vehicle followed and plunged when enron s stock price dropped and the guarantee was forced into play 32enron s misuse of spvs was by no means the only accounting trick perpetrated by the corporation but it may have been the greatest contributor to its abrupt fall enron couldn t pay the huge sums it owed creditors and investors and financial collapse followed quickly the company disclosed its financial information on balance sheets for the company and the special purpose vehicles before the end its conflicts of interest were there for all to see but few investors delved deep enough into the financials to grasp the gravity of the situation 