Comment by FastMonkey | Hacker News Reader

Comment by FastMonkey | Hacker News Reader

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Rosneft is a publicly traded company. When you "exit" a position, that usually means you sell the shares onto the market. Public shares are traded on a secondary market, so if they do that some other investors would be buying them. I haven't looked into this story that deeply, but I think it's unlikely that they would be striking a good deal with Rosneft to sell them directly back to the company. Rosneft may decide to buy the shares back from the market itself.

Edit: looking at the BP disclosure, they've decided to make the accounting changes that show they're going to sell the stake, they'll likely be looking for a smart way to offload the shares, probably to some large buyer (not just pressing sell on some brokerage account).

Edit 2: the $25B figure isn't really that accurate. Before this all kicked off, Rosneft had a market cap of around $70B,and BP held about 20%, or $14B. The article sums BP's carrying value for the company ($14B, coincidentally I think), and an accumulated foreign exchange loss of $11B, which had already been charged to equity. The current market cap of Rosneft is about $30B,so the actual hit to BP sharebolders will be something like $8B if they could sell at current prices.

So were does the loss come from exactly? Were the shares that BP held not marked to market already?

In accounting terms, if they already recognized the asset at x value, or paid x amount for it, any amount less than x is considered a loss.

Depending on what goes on here market wise before they can exit their ownership stake (if they haven’t already!) is what will decide how big a loss this is.

It's like a loss you would make if you bought a stock for $20 and sold it for $18. Someone else buys it for $18 and it might go up or down from there. Rosneft got their money back when they initially sold the stock to the market.

I think BP is a UK company and I'm not that familiar with the specifics of their accounting system. In the disclosure they say they considered that they had "significant influence" which is an IFRS accounting term. That would mean (as simply as I can explain it) that the initial purchase is recorded at cost with their share of Rosnefts profits and dividends recorded against that holding (along with a large bundle of other accounting details).

> Were the shares that BP held not marked to market already?

No, they were treated using the equity method:

https://en.wikipedia.org/wiki/Equity_method

I think there is an SEC rule that prevents large block trades from happening on the open market. Many of these are done behind the scenes or during aftermarket hours, but always have to be approved by the SEC.

BP is not a US company nor is Rosneft. There is no reason the sale has to happen on an SEC controlled market. SEC rules do not necessarily apply here.

>I think there is an SEC rule that prevents large block trades from happening on the open market

Not quite an SEC rule, just self interest.

You want to get the best price for your stake and your options are to liquidate over the course of a few days in the open market (in which case word gets out) or private placement (usually the best option).

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