Trevor Noren, managing director at 13D Global Research and Strategy, discusses how the concentration of wealth and corporate power is shaping his macro perspective. He sees the past three decades of industry consolidation as root causes of the problems that the American economy currently faces: stagnant growth, increasing wealth inequality, and a QEdependent stock market. Noren predicts that this trend of consolidation will reverse, and he sees significant investment potential in gold, small cap stocks, and companies leading the decentralization movement. Filmed September 26, 2019 in New York.
(32 min) Before, the monopoly was in production, but now it is in ranking a huge supply.
Need a word for Power through Network Effects, even though there are alternatives
People would see and react if you were a monopoly that jacked up the price of oil, but if you are Google and Amazon, you could reduce someone’s ranking and only a minority will notice.
Antitrust was designed to deal with scarcity, but that makes current antitrust that deals with abundance worse.
(57 min) What’s good for the goose is good for the gander. If Silicon Valley wants net neutrality, they should be open to regulation too.
This episode surprised us; through a discussion of who is at fault in the latest series of new vs old-world spats, we realized that not only has the Internet fundamentally changed winners-and-losers, but also the very nature of economic competition and the type of regulation that is required.
Topics & Links
- Mathew Ingram: Giants Behaving Badly – GigaOm
Google v MetaFilter
- Matt Haughey: On the Future of MetaFilter – Medium
Journalism v Facebook
- Mike Hudack: A Rant About the State of Media – Facebook
- Ben Thompson: Newspapers are Dead; Long Live Journalism – Stratechery
Amazon v Publishers
Antitrust, Network Effects, and the Age of Abundance
Do Tech Companies Have a Responsibility to Society?
On how the Internet has fundamentally changed the world, and how government regulation is hopelessly behind
Saudi Arabian Oil Co. is considering a plan to split the world’s largest IPO into two stages, debuting a portion of its shares on the Saudi stock exchange later this year, and following up with an international offering in 2020 or 2021, according to people familiar with the plans.
The company is leaning toward Tokyo as the venue for the second phase of its proposed plan, the advisers and officials said, as political uncertainty in the U.K. and China reduces the appeal of London and Hong Kong’s markets.
Saudi Arabia’s state oil giant, also known as Aramco, revived plans to sell 5% of its stock in an initial public offering earlier this month aimed at funding Saudi Arabia’s efforts to diversify its economy beyond oil.
With earnings of $111 billion in 2018, Aramco is the world’s most profitable business, outstripping juggernauts such as Apple Inc. and Exxon Mobil Corp. But the company has seen many twists and turns on the road toward its IPO. Aramco and its advisers drew up for a potential listing in 2018, but the offering never materialized.
Everything from the fundraising amount, to the valuation of the company, to the venue for the listing, has been hotly debated, according to people involved in the discussions. The company had initially targeted raising $100 billion, but it remains unclear what the final number will be.
The outcry that followed the murder of Saudi journalist Jamal Khashoggi last October also complicated plans to attract investors, according to people familiar with the matter.
According to one plan under consideration, the company could seek to raise as much as $50 billion in a domestic listing, one person said. Both domestic and international investors would have access to the stock in a domestic listing.
If Aramco and its advisers choose Tokyo as the setting for the international offering, it would be a disappointment for London and Hong Kong, which were initially seen as the most likely locations for the listing. Both locales were considered politically safer than the U.S., but are now less likely, the people said.
Saudi Crown Prince Mohammed bin Salman has pushed for an IPO in New York as a way to deepen Saudi ties with President Trump. But Aramco Chairman Khalid al-Falih has opposed the U.S. option over concerns that Saudi assets could be targeted by terrorism-related lawsuits. The Justice Against Sponsors of Terrorism Act, passed in 2016, allows terror victims’ families to sue foreign countries for compensation.
The company could invite antitrust litigation if it were to list there due to its membership in the Organization of the Petroleum Exporting Countries and the cartel’s efforts to control oil production and prices. Aramco identified the risk of such litigation in its bond-offering prospectus.
London, which has lobbied Saudi Arabia to host the IPO, was seen as a favorite when Prince Mohammed visited the U.K. last year. But the Aramco advisers and Saudi officials said they were increasingly concerned about the regulatory uncertainty that could arise from the U.K.’s plan to leave the European Union on Oct. 31.
On Wednesday, U.K. Prime Minister Boris Johnson moved to shut down Parliament for several weeks, a tactic aimed at preventing opposition lawmakers from blocking the U.K. from exiting the EU without a deal.
An Aramco adviser said leaving without an agreement increased the chances that the U.K. would align its legislation with the U.S.—including the terrorism laws that have been an impediment to a New York listing.
Meanwhile, Hong Kong has been rattled by protesters who have fierce objections to a bill that would have allowed extradition of criminal suspects to China. The demonstrations have evolved into a broader pro-democracy movement and disrupted business and travel.
Aramco’s press office said the “company continues to engage with the shareholder on IPO readiness activities.” It “is ready and timing will depend on market conditions and be at a time of the shareholder’s choosing,” it said in an email comment.
The Saudi officials and Aramco advisers said no final decision has been made about where, or when, any listings would take place and all options remained open. Still, officials said they were leaning toward a listing on the Tokyo exchange.
A spokeswoman for the London Stock Exchange declined to comment. The Hong Kong bourse didn’t respond to a request for comment.
A spokesman at Japan Exchange Group Inc., which operates the Tokyo Stock Exchange, said Thursday, “there has been no change in the status [of a potential Aramco IPO] so far. But there has been no change in our attitude that we would like the company to come to the TSE.”
Japan Exchange Group’s Chief Executive Akira Kiyota has repeatedly expressed his eagerness to have Aramco listed in Tokyo. And in June, Saudi Arabia, which supplies about a third of Japan’s oil, mentioned “cooperation in the IPO of Aramco” in an outline for economic partnership with Japan.
The Tokyo exchange has attracted some of the world’s largest IPOs, including last year’s nearly $24 billion issue by SoftBank Group Corp’s mobile phone unit. It was the world’s second largest IPO after China’s Alibaba Group Holding Ltd. listing in 2014, and showed that the exchange can manage big debuts and serve a large pool of investors.
Aramco’s interest in pursuing a local listing emerged as the company has discussed with bankers the possibility of launching the IPO before the end of this year, and asked about the valuation Aramco might expect with a domestic-only offering, according to people familiar with the matter.
Prince Mohammed is looking to value Aramco at $2 trillion. Bankers and other Saudi officials say they believe a range of between $1.2 trillion and $1.5 trillion is more realistic.
The sale of a smaller amount through the domestic offering could bring Aramco closer to the crown prince’s goal by making it easier to ensure investors’ demand for the available shares exceeds supply, which would drive up the company’s ultimate valuation, some bankers suggested. In turn that valuation would set the floor for a subsequent listing on an international exchange in 2020.
Alternatively, Aramco could try to sell a stake to a so-called cornerstone investor such as a sovereign-wealth fund at the target valuation—ahead of the IPO, to establish a precedent, one banker said.