As Ebbers oversaw the explosive growth of WorldCom, he borrowed heavily to finance his own purchase of company stock. He even used his stock as collateral for other loans, some of which ostensibly were used to purchase additional stock. Ebbers apparently believed Worldcom would ride a wave of success for a long time because he locked himself into a personal financial “position that works only if the stock is going to rise and that is financially fatal if it declines.”
The origin and growth of WorldCom
Ebbers moved from Edmonton, Alberta to Jackson, Mississippi to attend a small Baptist college on a basketball coach and hotel owner. In 1983, Ebbers “met a group of investors who had come to technologically-deprived central Mississippi to cash in on the federally mandated breakup of AT&T.” The group formed Long-Distance Discount Services (LDDS) and designated Ebbers as the leader. Ebbers believed that the road to success in telecommunications was to expand the communication networks, thereby increasing economies of scale. By 1995, many of America’s largest corporations were customers of the LDDS voice and data network. LDDS renamed itself WorldCom and continued to acquire telecom companies.