Worldcom Essay

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WorldCom was the darling of Wall Street and the Telecom Industry of the 90’s. WorldCom’s growth wasn’t generated by efficient internal operations but WorldCom grew rapidly through acquisitions and from increased demand for telecom services and high stock price was a powerful currency to make acquisitions. WorldCom's rise to the top of the telecom world was swift. Its fall was swifter still--and it's finally hit bottom. $180Billions of shareholder value lost (based on peak stock price). $37.5B of debt and preferred stock holder value lost. $750M settlement paid to SEC. 57,000 employees lost jobs. All the employees lost most of their retirement savings (invested in WorldCom stock). CEO Bernard Ebbers became very wealthy from the rising price of his holdings in WorldCom common stock. However, in the year 2000, the telecommunications industry entered a downturn and WorldCom’s aggressive growth strategy suffered a serious setback when it was forced by the US Justice Department to abandon its proposed merger with Sprint in mid 2000. By that time, WorldCom’s stock was declining and Ebbers came under increasing pressure from banks to cover margin calls on his WorldCom stock that was used to finance his other businesses (timber and yachting, among others). During 2001, Ebbers persuaded WorldCom’s board of directors to provide him corporate loans and guarantees in excess of $400 million to cover his margin calls. The board hoped that the loans would avert the need for Ebbers to sell substantial amounts of his WorldCom stock, as his doing so would put further downward pressure in the stock's price. However, this strategy ultimately failed and Ebbers was ousted as CEO in April 2002. The statement “pin stripes to prison stripes” was used in American Greed to describe how Bernie Ebber aggressive accounting practices lead to his rise as the CEO of WorldCom and his down fall as

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