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A comment on How much is 5% of Saudi Aramco based on DCF Model?.

Re:How much is 5% of Saudi Aramco based on DCF Model? by rsj_hn on Wednesday July 05, 2017 @04:52AM (#14700835)
I think this is a nice piece, but would like to see some discounting for political risks. Saudi Arabia will retain a controlling interest in a firm that is strategically important for many reasons other than turning a profit:

* to provide tax revenues to the Saudi Government

* to provide cheap oil to the Saudi public

* to control the price of oil for political reasons -- e.g. if it wants to reward/punish other nations

* as a symbol of national sovereignty

Moreover, the Saudi Government is in a difficult position needing to placate some extreme forces and competing claims in their nation. It seems difficult to believe that this 5% share is going to prioritized when tough choices need to be made in the future.

That alone would, to me at least, call for a heavy discounting of future cash-flows.

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Re:How much is 5% of Saudi Aramco based on DCF Model? by justinterested on Saturday July 08, 2017 @10:35PM (#14728099)
By the way, I think he has most of what you have stated in it in another post. Just search for " Investor Risks associated with Saudi ARAMCO IPO" in Google.

https://goo.gl/QnT6gi

[ Parent | on HN ]
Re:How much is 5% of Saudi Aramco based on DCF Model? by justinterested on Thursday July 06, 2017 @12:40AM (#14708172)
Good point. What would you consider an appropriate Discount Rate in this case ?
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Re:How much is 5% of Saudi Aramco based on DCF Model? by rsj_hn on Friday July 07, 2017 @12:28PM (#14719686)
For me, personally it would be in the ballpark of 50%. I just don't see this regime as being very trustworthy or serious about rolling back the trend of nationalization in the oil sector that has been the dominant feature of this ruling family.
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Re:How much is 5% of Saudi Aramco based on DCF Model? by justinterested on Friday July 07, 2017 @06:11PM (#14722578)
I tend to kind of agree that a very high discount rate is appropriate, but, I do not see how Saudis will agree to even discussing 30% let alone 50% discount rate. They will rather quietly go to Institutional Investors Pre-IPO and allow them a major buy in share. There is no doubt that Saudis are unreliable and too many risks at play.
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