Round-Tripping (Finance)

Round-tripping, sometimes called round-trip transactions, is a scheme in which a company sells an unused asset to another company while simultaneously agreeing to buy back the same or a similar asset at roughly the same price, producing what the Wall Street Journal has described as no net economic substance while being recorded as legitimate sales and purchases. The transactions generate no real profit but let a company appear to be growing and active, attracting investors and inflating market capitalization to meet analyst expectations. The practice contributed to temporarily inflated valuations at energy traders including Enron, CMS Energy, Reliant Energy and Dynegy, and at the financial services firm Wirecard, and in international finance it has also served as a method to evade taxes and launder money.