Comment by zby | Hacker News Reader

Comment by zby | Hacker News Reader

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I have been reading about that deal on Matt Levine newsletter from time to time and I have always wondered who is going to trust the Saudis on this. The country is a kingdom, not a parliamentary kingdom but a traditional one where the king really decides everything, oil is the only thing that counts in that country so presumably the king decides everything about oil there and the whole government machine works towards that goal. There is no independent judiciary, no freedom of press, nothing - how the shareholders could believe that they have any control over the enterprise, how could they even believe that they are not lied about even the most basic information (especially now after the Khashoggi killing). Not mentioning the taxes - the kind always can change the taxes if he needs some more money or just thinks that the investors get too much - so what would be the deal here? The investors give money to the king, and the king gives them something back if he wants, when he wants?

I know that the Saudi Arabia rich families can be compelled to buy shares - but outside of the country?

But maybe I am silly because I have the similar thoughts about investments in China enterprises. But even that is on a completetly different level.

As an aside, I've been reading the Matt Levine newsletter over the last few days, and I've really enjoyed it. Does anyone have any recommendations for other good newsletters of this kind?

Not a regular newsletter, but you might enjoy Byrne Hobart's essays on Medium:

https://medium.com/@byrnehobart

Stratechery is another good choice.

I really like IEEFA (Institute for energy economics and financial analysis)

It’s mostly an aggregation of multiple sources, but they often have their own reports: http://ieefa.org/

It’s energy and finance related, focusing on the economics of energy globally & renewables.

US troops and aircraft carriers protect saudis from neighbour nations (Iran, Iraq, etc.) and ensure that the kingdom is safe.

I am sure saudi king will not dare to piss off american investors, otherwise arab spring in KSA would have happened already

I wish I had a link, but I recall hearing on Recode/Decode that they would threaten to give their money to competitors if they didn’t accept funding.

Doesn’t really answer your question, but it did sound like not everyone was happy with Softbank rounds.

the king always can change the taxes

Yes. That's always struck me as the central problem. Outside investors have a claim on Aramco's earnings power, until they don't. Since you don't really get meaningful voting rights, you could end up with a certificate that's comically irrelevant to the way Aramco's governance (and money flows) really work.

Investing in any company carries some risk that the whole thing is a sham and it blows up in your face. There's probably a bit more risk in Saudi Arabia, but a democratic system and impartial courts didn't stop Worldcom from lying about basic information and being taken from its stockholders.

Sure there is risk, Wordcom - at least the management went to prison - do you think the king would go to prison in this case? But on a more fundamental level it is not even a sham, a sham would mean that one side breaks the rules - but what are the rules here when the king can just change the taxes if he wants.

The king could get dead, BTW, depending on what happened after that.

I think this definitely would (have?) been an issue, and "priced in," at least to some extent.

OTOH, it's not just rule of law that might restrain the king. It's not in his best interest to cause a run/devaluation of shares in his kingdom's wealth.. in some senses in the crown. International corporate capitalism 1.0 was long-lived and happened while kings still had power... parliaments or not. It's not impossible Aramco could find some equilibrium.

Anyway, even just internal Saudi money could amount to a lot. A little bit of international billions would help boost their trust. I think it comes down to execution mostly, whether or not it happens.

Couldn't ask for a better time, macro-finance-wise.

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