There isn’t one foreign friend of ours – from inside or outside the investment community – that hasn’t asked us “the Petrobras question(s)”.
We are sorry to say that we don’t have an answer and probably never will. Call us superstitious, but state-owned companies have a knack for causing the occasional investment disaster. We put them in the “too conflicted” box and move on.
It doesn’t mean we don’t spend time looking at governance and incentive structures – much to the contrary, that’s a significant use of our time. The Petrobras case, if taken solely in this regard, is very interesting – if unsurprising – and will be taught in business schools around the world for the next 10-20 years.
In the meantime, we point to Prof. Aswath Damodaran’s musings on Petrobras. It should be very clear that, by linking to the article, we imply neither agreement nor disagreement with his valuation exercise.