Who controls a country? Venezuela, and its state-owned oil company Petróleos de Venezuela SA, have stopped making payments on a lot of their debts. Many of these debts are in the form of bonds governed by New York law, and so bondholders have sued Venezuela in U.S. courts asking for their money back. This is not, in sovereign debt cases, a foolproof approach: The court can tell Venezuela to give them their money back, but it can't make Venezuela do it; Venezuela is its own country and doesn't have to listen to U.S. courts. Still it might be good for bondholders, or at least bad for Venezuela, if the bondholders sue and get U.S. court judgments against Venezuela and PdVSA. Venezuela and PdVSA get a lot of their money by exporting oil abroad, and they own lots of assets in the U.S. in the form of PdVSA's refining subsidiary Citgo Petroleum Corp.; defaulted bondholders might be able to find ways to seize some of that oil or those Citgo assets to pay off their claims. So Venezuela would like to defeat those lawsuits. It is not particularly easy to do that, given that Venezuela really hasn't paid the money; on the facts, this is a pretty straightforward case of default. But there is one weird complication, which is: Who is "Venezuela," anyway? Actual power in Venezuela seems to mostly be in the hand of President Nicolás Maduro's government, but Maduro is isolated internationally and not recognized by the U.S. Call this government Venezuela-1. Meanwhile the dissident interim government of Juan Guaidó has international recognition but very little in the way of effective control of the Venezuelan state. Call it Venezuela-2. One basic procedural form of this question is, when someone sues Venezuela in a New York federal court, who shows up on the other side? Who represents Venezuela? The probable rough answer is that it is the government of Venezuela as determined by U.S. law (not Venezuelan law), which means effectively the government recognized by the U.S. State Department, which means Venezuela-2, Guaidó's interim government. But this raises a second, substantive question, which is: What is the point of suing Venezuela and getting a judgment against the interim government, when the interim government doesn't control Venezuela's oil or money or productive capacity or lawmaking apparatus or anything else? In theory, the idea in a case like this is you sue Venezuela and the court tells Venezula to pay and then Venezuela nods and accepts the order and pays you. It doesn't necessarily work like that in practice—Venezuela can disobey the court—but that's the idea. But here, you sue Venezuela and the court tells Venezuela-2 (Guaidó) to pay you and then Venezuela-1 (Maduro), the one with the capacity to pay you, just ignores the whole thing because they weren't involved. It's just weird. Guaidó's lawyers are trying to take advantage of this oddity. Here are sovereign-debt experts Mark Weidemaier and Mitu Gulati: Court papers defending against the two latest creditor lawsuits reveal an intriguing and innovative strategy. ... In filings made a couple of weeks ago (June 21, 2019), the lawyers for Venezuela (Arnold & Porter) raised three doctrines that one rarely sees in modern sovereign debt litigation for the simple reason that these ordinarily have little chance of success: impossibility, necessity and comity. … The doctrine of impossibility (or impracticability) excuses a party's non-performance of its contract obligations when some event outside of that party's control, and not foreseen at the time of the contract, makes it difficult or impossible to perform, unless the non-performing party assumed the risk of such events. For instance, a blight might excuse a farmer's obligation to deliver grain (unless the contract assigned this risk to the farmer). Borrowers who cannot repay loans almost never succeed in arguing impossibility. The reason is that the law typically assigns the risk of non-payment to the borrower, no matter the reason for the borrower's inability to pay. ... Is Venezuela also an exception? Perhaps. As we understand the Guaido team's argument, it is that the government should at least temporarily be excused from paying because its responsible officials—as conclusively recognized by the U.S. government—are in exile and are unable to control the government or its resources. The argument is clever. Arguably, the current situation has resulted from events that were unforeseeable and that resulted from foreign policy decisions made by the Trump administration that were not caused by the (rightful) Venezuelan government. And the argument has a certain equitable appeal. Why not give the government a break until its rightful leaders, as determined by the U.S. government, are in control? The argument is not that Venezuela can't pay its debts, which is very true (it is out of money and in a humanitarian crisis, and no one thinks it will ultimately pay its debts in full) but not much of a legal defense. The argument is that Venezuela-2 can't pay its debts, because Venezuela happens to be controlled by Venezuela-1. And Venezuela-2 is the one defending the lawsuits. Effectively the argument is: For reasons beyond our control, we have temporarily misplaced our country, so you can't sue us to pay back your bonds until we get it back. That seems like kind of a hard argument to win, but you don't necessarily have to win: Just slowing down the lawsuits to argue over this point has some benefits to Guaidó's interim government. And as Weidemaier and Gulati point out, the argument did have that effect; the U.S. judge gave the parties more time to argue about this, effectively pushing any decision back "until mid-April 2020, or perhaps even longer." By then I suppose there is some hope that Venezuela-1 and Venezuela-2 will have merged (by Guaidó taking power, or by the U.S. recognizing Maduro, or by some compromise or other result) and it will all be a bit more orderly. This is only the half of it, by the way! I was oversimplifying when I said that Maduro's government controls Venezuela's oil and money and productive capacity. In fact, some of Venezuela's money is held abroad, and, as the internationally recognized government, Guaidó's interim government might be able to gain control that money. And a relevant part of Venezuela's economy actually exists in the U.S.: It is Citgo, which has declared its independence from Maduro and effectively answers to Guaidó. Technically Citgo is a subsidiary of PdVSA, the state oil company, and it answers to PdVSA. But it answers to PdVSA-2, a PdVSA-in-exile whose board is appointed by Guaidó, not PdVSA-1, the PdVSA-in-situ that actually controls Venezuela's oil and answers to Maduro. And in fact PdVSA-2, Guaidó's PdVSA, the one that doesn't control PdVSA's oil and operations but that does control Citgo, has made a payment to bondholders. Here, from mid-May: Venezuela's ad-hoc board of directors for state oil company PDVSA, appointed by opposition leader Juan Guaido, said on Thursday it has made an interest payment on its bond maturing in 2020, delaying uncertainty over its crown jewel U.S. asset. The PDVSA bond is backed by shares in U.S. refiner Citgo and failure to make the $71 million interest payment would have allowed bondholders to seize the shares as compensation. …. President Nicolas Maduro's government had remained current on the 2020 bond even as it fell behind on more than $10 billion in interest and principal payments on other bonds issued by PDVSA and the government. But efforts by any Maduro-linked entity to pay would have been complicated by sanctions imposed by the United States on PDVSA in January as part of a bid to pressure Maduro to step down. … PDVSA's ad-hoc board has said it will use uncollected oil revenue from PDVSA to make the bond payment but has not provided further specifics about the source of the funds. The bondholders who are suing argue that this is a reason to reject the impossibility defense: "Venezuela's impossibility defense is refuted by the fact that the Guaidó government made a $71 million interest payment to other bondholders less than a month ago," they write. If Venezuela-2 controls Venezuela's money, then maybe it should pay the bonds, or at least be declared in default. Away from these philosophical issues about who is in charge, the interim government and a committee of bondholders have both released proposals for how to restructure Venezuela's debts. (Here are Weidemaier and Gulati on the government's proposal, and Ricardo Hausmann et al. on "How to Address Venezuela's Crushing Debt Burden.") These proposals are pretty general at this point, and I suppose there is not much sense in the two sides sitting down to iron out the details, since the interim government doesn't control Venezuela and there's no guarantee that whatever they agree to can actually happen. But an important plank of the interim government's proposal is that it would give equal treatment to creditors who have and have not gotten U.S. court judgments against Venezuela; the point is to deter creditors from seeking judgments: "We cannot allow special treatment because if we do, we are creating an incentive for litigation," José Ignacio Hernandez, Mr Guaidó's attorney-general, said. "The message is, 'please don't sue Venezuela, because it will be a waste of money'." The message here, as in the lawsuits, is basically that you have to wait to figure out who runs Venezuela before you can get your money back from Venezuela. Which seems reasonable enough, though it is hard to know how long it might take. Who controls a company? We get these from time to time around here and they're always irresistible, so here is the story of a U.K. energy-drinks company called Rich Energy, which tweeted that it was canceling its sponsorship of the Haas Formula 1 racing team "for poor performance." ("Haas [are] nice people but the car is going backwards. … A milkfloat at back of grid a disaster for us," Rich Energy's chief executive officer told a reporter.) Then the company put out a statement saying no, the sponsorship is still on, that tweet was unauthorized, "the rogue actions of one individual." The one individual seems to have been the CEO, William Storey. When I say "the company put out a statement" I mean … the stateement attributes itself to "the shareholders who own the majority of Rich Energy." It also says "we are in the process of legally removing the individual from all executive responsibilities." That is: The shareholders who own Rich Energy have taken control and fired the CEO for unauthorized tweeting and general differences of opinion. But that is just one perspective. The CEO's perspective, meanwhile, as he told Jalopnik, is[1]: I am the CEO and founder of Rich Energy and control the board of directors and all assets.
I also control more than 51% of the shares
There has been an attempted coup of my position by a handful of shareholders who have a cosy relationship with Red Bull and Whyte bikes.
These shareholders led by Neville Weston and Charlie Simpson have failed in their efforts.
All key stakeholders support the current strategy of the UK's premium energy drink Rich Energy You can read a version of this on the company's official Twitter account, too, calling the shareholders' statement "ludicrous," "risible," and an "attempted palace coup." His lawyers add: "Given the information available at Companies House on Rich Energy Limited, including its shareholder base, we are somewhat at a loss as to how you will be able to wrestle control of the company from Mr. Storey." The implication is that there is some disagreement over who owns how many shares, with the shareholder group saying that they have a majority (and, thus, control) and the CEO saying that they have a minority (and, thus, not). So an important, perhaps decisive, question is "does the investor group actually have a majority or a minority of the (voting power of the) shares?" But, as always in these situations, that is not the only question. "Who does the Formula 1 team think is in charge?" is a relevant one. (The shareholders, apparently.) Or: "Who has the Twitter account password?" (The CEO, apparently.) Credit ratings I mean, sure: S&P Global Inc. became the first foreign credit-rating company to offer an independent assessment of risk in China's vast domestic debt market, giving a top grade to a unit of the country's largest bank. The move is a milestone for the $13.3 trillion onshore bond market, where foreign investment is increasing and the world's three major rating companies—S&P, Moody's Investors Service and Fitch Ratings—have long coveted a bigger presence. Beijing is also eager to foster a more rational market in which investors are more discriminating about credit risk, and recognize they won't be shielded from defaults. S&P gave a triple-A rating to ICBC Financial Leasing Co., a unit of Industrial & Commercial Bank of China Ltd., with a stable outlook, it said Thursday. The grade is the highest on the dedicated scale S&P has developed for China, which doesn't correspond to the same grade on its global system. I am sorry, this is not an important milestone, the real milestone will be the first non-AAA rating. I think it is entirely possible to have both "a more rational market in which investors are more discriminating about credit risk" and a special (higher) scale that "doesn't correspond to the same grade on its global system," but those desires are at least a little at cross-purposes; if you inflate the special scale too much then it overwhelms the ability to discriminate. China should send S&P an absolute dog next, to see if it gets an AA+. How do you even business Here's an article about "The Dark Side of Startup Success" and I am sorry but I was stopped dead by the second paragraph, about Etsy Inc. CEO Chad Dickerson's experience of his company's initial public offering: His toddler had vomited and was throwing a tantrum. Mr. Dickerson, too, felt sick to his stomach as he worried about how the online crafts marketplace would live up to the hype. Back in the office, employees celebrated by dousing him with a bucket of ice water. He recalls the chill he felt the rest of the day in a cold, wet suit. They … he … what? Why didn't he … I just … go home, man! Take that suit off! You can't sit around your office in an ice-water suit all day. Also I understand that this is a normal method of celebration in sports, where you shower and change after the game, but in the business context it seems kinda mean to just dump ice water on a guy in a suit if he's got meetings all afternoon. The lesson here is that if you are an investment banker leading an IPO, you need to put this on your checklist. You are an expert repeat player at IPOs; the entrepreneur whose company you are taking public is doing this for the first time. As the roadshow ends, as you're giving him feedback on investors' reactions and preparing him for pricing and allocation and the first day of trading, you need to tell him, "look, there is some chance that some idiots will douse you in ice water, you need to warn them not to do that or keep a change of clothes around or probably both." He is paying you millions and millions of dollars for advice on how to navigate his IPO; the advice needs to be comprehensive. Then there's this Yesterday, after spending all day hanging out with extremely online weirdos, Donald Trump announced that he is "not a fan of Bitcoin and other Cryptocurrencies," which is ... relatable. He also seemed to say that Facebook Inc.'s Libra stablecoin project will have to be chartered as a bank. This has been a matter of some uncertainty and speculation—presumably Libra would prefer not to be a bank, certainly Facebook would, and it is not clear to me whether the law would require it (or even exactly how Libra will work). Now the president of the U.S. has announced that it will require a bank charter. Is that … true? If you are Facebook's lawyers, do you consider the matter resolved? I feel like it might turn out to be true, but if so it will be a pure accident. I am not sure that there's anyone with less influence over U.S. financial regulation than Donald Trump. On the other hand, you know who does have a lot of influence over financial regulation? Federal Reserve Chairman Jerome Powell is also a little skeptical of Libra: Mr. Powell, speaking to the Senate Banking Committee on Thursday, expressed doubt about the feasibility of launching the digital coin, dubbed Libra, on the timeline Facebook has targeted. "I think we agree that Libra raises a lot of serious concerns, and those would include around privacy, money laundering, consumer protection, financial stability," he said. "Those are going to need to be thoroughly and publicly assessed and evaluated before this proceeds." ... "The size of Facebook's network means it could be, essentially, immediately systemically important," Mr. Powell said Thursday. "This should be subject to the highest level, the highest expectations in terms of privacy but also prudential regulation." That does not go nearly as far as saying "it's a bank," but it's not a free pass either. Things happen People are worried about bond market liquidity. The Mystery Surrounding Jeffrey Epstein's Private Island. Accused sex trafficker Jeffrey Epstein's old boss says he knows where the mystery millions came from. Real Hedge-Fund Managers Have Some Thoughts on What Epstein Was Actually Doing. 'I Think He's Engaged in Blackmail': A Jeffrey Epstein Expert on Where He Made His Money. Read Jeffrey Epstein's Galaxy-Brain Philosophical Advice. Deutsche Bank's Unloved Assets to Cast Long Shadow in Overhaul. Deutsche Bank overhaul reveals more loss-making legacy trades. Germany Inc. Shudders as Deutsche Bank, Others Face Crises. The problem with the amazing, disappearing Bund market. New CLO Buyers Set Up Clash of Titans in $600 Billion Market. YOLO Is the First NYSE-Listed Pot ETF to Bet on U.S. Marijuana Stocks. Beleaguered Money Managers Find Bright Spot in ESG. What Really Happened With West Virginia's Blockchain Voting Experiment? "Siblings matched, and everyone else was horrified but we were ecstatic because we're like, 'It works.'" Thousands of people have taken a Facebook pledge to storm Area 51 to 'see them aliens.' AI bluffing. Freeway Revolts! Millennial nuns. Peak newsletter. If you'd like to get Money Stuff in handy email form, right in your inbox, please subscribe at this link. Or you can subscribe to Money Stuff and other great Bloomberg newsletters here. Thanks! [1] Red Bull, of course, is a much bigger energy-drink company; Whyte Bikes is a company that won a lawsuit against Rich Energy for copyright infringement. | 
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