
Saudi Aramco Is the WeWork of Energy with Pulled IPO - pseudolus
https://www.bloomberg.com/opinion/articles/2019-10-21/saudi-aramco-s-pulled-ipo-shows-it-s-the-wework-of-energy
======
nabla9
Saudi Arabia is economic time bomb. They want to sell because they need the
money.

Saudis have been running budget deficits 4 - 5 percent of the GDP year after
year. Might hit 7 percent this year.

Cutting spending may not be politically possible because it's buying peace.
Official unemployment rate is less than 15% but it's estimated that only less
than half of working-age Saudis hold jobs or actively seek work.

Foreign exchange funds provide buffers but their net foreign assets are
gradually eaten away if oil price don't recover.

~~~
mc32
Seems they would be a decent candidate to try out UBI and see if in practice
it works.

They’ve got wealth and they have lots of underemployed and unemployed.

~~~
LegitShady
UBI is nonsense socialism campaigning for the votes of the uninformed

"We'll just give everyone money. Nobody will demand more and the promise of
more money won't become the key election issue as governments directly try to
buy off their citizens for votes. Nothing can go wrong."

Huh why would you do that!

"AI!"

It's like a comedy but it's not actually funny, just full of clowns.

~~~
MuffinFlavored
While the tone of your post is a little rough, I am curious to see if any of
the readers here agree that UBI isn't a great idea for our current society

I for one don't understand how it won't cause mass inflation. Every reason I
read for why it won't is usually along the lines of "we did an experiment with
100 people, it turned out great!"

100 people != the population of a country

~~~
navigatesol
> _I for one don 't understand how it won't cause mass inflation._

America already gives away vast sums of money to various people and programs,
over $2 trillion annually. UBI is just a way of saying, "here's your share,
spend it how you wish".

~~~
MuffinFlavored
From what I understand it, UBI (as proposed by Andrew Yang) will give a _lot_
who are not receiving any money whatsoever (from any government programs)
income they didn't necessarily need.

aka, he is proposing to give both impoverished people and billionaires UBI

------
tekkk
Heh heh quite audacious to demand over-price for a company which only business
is selling fossil fuels. I mean it isn't really a field that has great future
prospects. And they know as well as the rest that without diversifying and
sharing the risk it will be tremendously damaging to their economy once the
renewables start really kicking in and pushing fossil fuel out of the regular
use.

With quick look at their wikipedia page their P/E number with 1.1 trillion
valuation is about 10. With 2 trillion it would about 20 which is quite insane
if that's what they are asking. It's always these people who have distorted
view of reality that seem the most damaging to this world. Worked for Steve
Jobs maybe but I think in the end, he had a pretty good perception of the
technology market.

Yeah, well. Good luck selling that thing. Can't really be a surprise for them
that people aren't jumping out of their pants to buy Aramco stock. I think it
would be a hard sell even with the 1.1 trillion valuation. Saudi-owned fossil
fuel company. A dream investment.

~~~
gridlockd
My prediction would be that fossil fuels will be about as important in twenty
years as they are today.

The green energy revolution is wishful thinking, people really want it to be
true and it distorts their expectations.

I also suspect that oil prices will remain low because of fracking and that
Aramco is really hedging against that, not green energy.

------
Iv
Oil is half the value of Saudi Arabia. The other half is US support. Since
WWII the deal has never changed: cheap oil in exchange of military support.

Saudi deals are effectively backed by US.

And a country like Saudi, whose fortune solely depends on exports, can't bend
the rules of trade and contract too much. It is very easy to sanction.

Kashoggi is what killed the project MbS had with this money (the futuristic
city NEOM, read about it, that was interesting). MbS had spent a lot of
resources painting himself as a progressive reformist, ready to make KSA
evolve out of the charia law.

That killing put him back down the scale of dictators. He admit it made his
project lose at least 10 years and that it was unsellable right now.

~~~
bksenior
Your using logic to answer a question that is normally one of emotion.

A single non elected ruler is going to make decisions on whim not process. As
long as there is one unchecked person, you can basically be assured that
unpredictability will be the norm.

~~~
colechristensen
I think both the freedom of kings and the accountability of elected officials
are being exaggerated. Both are constrained by the game they're playing and
both have much freedom to make bad decisions. Government power, regardless of
the type of government, only exists as a result of the consent of the people.
Any kind of government uses much of that power to manipulate that consent into
whatever their desires may be and they all have great but limited success.

~~~
bksenior
The statement is self defeating. Absolute power is playing far less "a game"
for the continuted hold of power than is elected. You're right that people
generally do whatever it is they think they can get away with, but simply put
a king doesnt asnwer to anyone so he is more likely to act in self interest
than someone who needs to please others.

~~~
arcticbull
There is an accountability, both international as we saw here, and domestic
which we likely won’t see unless it becomes overwhelming. A monarch who loses
support of their people is not long for the role either. Just as one who loses
support of their international benefactors. Yes they may get away with more of
these “domestic” matters than might a democratically elected leader but that
doesn’t mean much in the long run. Just look at Venezuela. Maduro won’t be
around forever.

There’s no such thing as absolute power in the realm of governance.

------
zby
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.

~~~
pcnix
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?

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

[https://medium.com/@byrnehobart](https://medium.com/@byrnehobart)

------
s_Hogg
I swear a few weeks ago I was reading the usual media outlets talking the
prospect of this IPO up at the same time. Now this. It feels to me like
someone got fed a line.

Edit: wait, the head of Aramco is now a Softbank director? What on earth is
going on there?

~~~
siculars
Saudis put something like 45 billion USD into one of the 100 billion +
Softbank funds. You get a director seat for that kinda money...

~~~
jansan
Time will tell if that's all they got for their money.

~~~
TheOtherHobbes
Just a reminder that when the Saudis needed cash, they locked some of their
richest families in a luxury hotel and "pressured them" until they handed over
around $100bn in what was labelled an anti-corruption drive.

If VisionFund 1 goes under, losing $45bn is going to make Masayoshi Son really
quite unpopular with the Saudis.

~~~
toomuchtodo
Unpopular enough to invite him to an embassy for a discussion?

~~~
edshiro
I see what you did here. Although they would never dare do this to Son.

------
Merrill
Do investors know 1) how much oil can be extracted at what levels of cost and
2) how much royalties and taxes will the company have to pay to the Saudi
government in the future?

Current cash flow based on current costs, levels of production and royalty/tax
payments are largely irrelevant.

Seems risky to me.

~~~
BlueTemplar
Indeed - Saudi Arabia is expected to hit peak oil roughly between 2010 and
2030 - and there are suspicions that the downslope is going to be harder than
the growth half, as they've reportedly been massively using water injection to
increase production.

So this could (have) be(en) just their way to dump the company for the maximum
amount of money while the getting was still good.

~~~
LegitShady
When someone gives you a 20 year range and half of it is already passed and
they can't narrow it down more they're probably making it up as they go aong.

~~~
BlueTemplar
You realize that this is pretty much what happened with conventional peak oil
?

[https://www.nationalgeographic.com/news/energy/2010/11/10110...](https://www.nationalgeographic.com/news/energy/2010/11/101109-peak-
oil-iea-world-energy-outlook/)

(Confirming in 2010 that we hit peak conventional in 2006.)

It takes years to confirm this kind of data...

And we don't even have access to Saudi oil data, the best we can do is
something like this :

[https://www.sciencedirect.com/science/article/abs/pii/S09204...](https://www.sciencedirect.com/science/article/abs/pii/S0920410515001539)

> Results show OPEC peak oil in 2028 at a production rate of 18.85 Gb/year and
> ultimate reserves of 1271.24 Gb.

------
aj7
What does it say when the royal family and 200 sheiks attempt to cash out of a
business that pumps oil at $5 a barrel?

------
Shotcalla
I work in oil and gas and it’s widely considered that with or without the IPO
that Saudi is screwed. Huge unemployed population (higher than official stats,
of course),reliance on oil demand that will be diminished in 20-30 years and
severely declined in 100, a huge welfare program to keep the unemployed folks
happy that keeps their budget balanced at $80 oil prices (prices are at
$50-$55 now and will probably stay there for a long time barring any very
serious political events or Elizabeth Warren banning fracking). To top it off
they literally have a ruling family that decides everything.

------
leroy_masochist
Calling Aramco the "WeWork of energy" is a bit of a stretch. Yes, the company
has problems; yes, it's been navigating the capital markets poorly; but at the
end of the day, it's an oil company that says it's an oil company. There isn't
any category-gaslighting or a charismatic CEO who bamboozles VCs with utopian
yoga-babble. Aramco is just an authoritarian state-owned oil company with all
the issues that come with that territory, and this article and its headline
strike me as facile clickbait.

~~~
fasicle
And they are extremely profitable, unlike WeWork.

[https://www.nytimes.com/2019/04/01/business/saudi-aramco-
pro...](https://www.nytimes.com/2019/04/01/business/saudi-aramco-profit.html)

------
tahdig
[https://outline.com/BbAsc8](https://outline.com/BbAsc8)

------
jimmywanger
[https://i.imgur.com/11EVBte.jpg](https://i.imgur.com/11EVBte.jpg)

Basically, there's going to be a dip in the worldwide demand for oil, and with
the permian basin coming online, we can satisfy much of the world's demand for
plastics and lubricants. Makes sense that they would try to get a last hurrah
out there.

------
yurikoval
paywalled [https://archive.is/nIc96](https://archive.is/nIc96)

------
koolba
Where did the made up title for the HN post come from?

While catchy, that line is neither the title, byline, or even a sentence from
the article.

EDIT: _Ha! A search for the article shows the original title. So either
Bloomberg is feeding clickbait titles purely to Google or they switched it
after it went live. New title is "Saudi Aramco Needs to Get Realistic About
Its IPO"._

~~~
anonu
Bloomberg usually has 2 or more titles for it's articles. It's been doing this
for at least a decade. It's most pronounced or visible when you use the
Bloomberg terminal. You'll notice what they show 1 cohort (terminal users) is
usually very different than web users.

I'm guessing it's some sort of long running A/B experiment. They must have
great data on how to write attention grabbing headlines.

~~~
LegitShady
Tabloid journalism complete with testing clickbait headlines.

~~~
AJ007
The Bloomberg articles are generally garbage, the domain should really get a
penalty. They used to be fairly great, but there were some management shifts
at Bloomberg News and it never was the same after that.

------
tim333
As the article says they're very different things. The world's most profitable
company vs one of the biggest loss makers. I don't blame the Saudis for trying
it on with the valuation. If people won't buy at $2tr then drop it a bit -
same as selling a house or anything else.

