Enron shares have tumbled by more than one third as fears grow that the US energy giant will run out of cash before its takeover deal goes through.

The steep fall follows a drop of 23% in Enron's share price on Tuesday.

The US energy giant's shares - which hit $84.87 earlier this year - slumped to just $4.55 during Wednesday's trade.

Enron was the most heavily traded stock on the New York Stock Exchange, as investors faced renewed fears over the firm's survival.

The share price collapse - one of the most dramatic seen this year - has come as a particular shock since the company was previously a darling of the markets.

Misleading profits

Enron ran into difficulties after observers questioned mysterious charges in its balance sheets revealed in a second quarter profits statement.

Further questioning of these charges led to an investigation, which is still ongoing, by the US financial watchdog.

Enron has now admitted that it inflated its profits - the figures which had seen the firm win numerous prizes and awards, and earn 'buy' recommendations from many analysts.

The firm admitted that, due to some hidden charges, its profits were actually $600m lower during the 1997 and 2001 period than had earlier been claimed.

Crisis of confidence

The revelation prompted a massive sell off of Enron shares, leaving the once-mighty firm vulnerable to a takeover bid.

Enron's much smaller rival, Dynegy, emerged as a rescue buyer, promising new credit lines.

But analysts are now questioning whether Dynegy's planned $8.9bn acquisition will go ahead before Enron runs out of cash.

Enron rushed to reassure investors on Wednesday, saying it had secured the remaining $450m of a $1bn credit line and reaffirming its agreement to be taken over by Dynegy.

It also said that it was in talks with other lenders to restructure its debt obligation, and said it had pushed back until mid-December the deadline for repaying a $690m loan obligation.

The news helped a slight recovery in the share price, which closed at $5.01, a drop of 28.3% on the previous close.