In August, AMC Entertainment CEO Adam Aron told analysts he "could not be more upbeat" about the company's expansion into Saudi Arabia, where the cinema operator had recently opened the first new movie theater in the conservative Islamic kingdom in nearly four decades.
Aron had good reason to be effusive. In his words, the opening received "massive global publicity." AMC's single screen in Riyadh is more than 20 times more profitable than the average AMC screen. Plus, that profitability is coming cheap. Saudi Arabia's sovereign wealth fund is kicking in the "lion's share" of the capital necessary to build the planned 50 to 100 AMC theaters in the kingdom.
"Ah, the benefits of pent-up demand," Aron said on the company's second-quarter earnings conference call. "Over time, we expect that our 16th country will make a material financial contribution to AMC."
The arrangement illustrates how Saudi Arabia is relying on partnerships with foreign firms as the nation embarks on an ambitious endeavor to overhaul its oil-dependent economy — and how Western companies stand to profit handsomely from that project. However, those tie-ups are now fraught with reputational risk as the Saudi brand strains under the weight of allegations that the kingdom — and Crown Prince Mohammed bin Salman himself — orchestrated the assassination of journalist and U.S. resident Jamal Khashoggi.
As the scandal rages on, dozens of business executives, media companies and prominent individuals have dropped out of a high-profile investment summit in Riyadh next week. At least two companies are rethinking lucrative deals with the kingdom's sovereign wealth fund.
The Saudis initially denied the allegations. But amid mounting scrutiny and threats of U.S. sanctions, the kingdom is reportedly devising a plan to acknowledge that Saudi agents were behind Khashoggi's suspected slaying.
The question likely troubling Saudi Arabia's corporate partners is whether Crown Prince Mohammed, often called MBS, can distance himself from the scandal. The 33-year-old successor to the throne is the public face of Vision 2030, the nation's economic and cultural reform plan. He also chairs the Public Investment Fund, or PIF, the sovereign wealth fund backing AMC's Saudi expansion.
The PIF plays a critical role in one of the 12 pillars of Vision 2030: forming strategic partnerships to attract foreign technology and expertise. The fund plans to accomplish that goal by deploying the kingdom's wealth to help foreign partners quickly scale their business inside Saudi Arabia.
If the scandal over Khashoggi's disappearance keeps potential partners on the sidelines, it could hamper Saudi Arabia's ability to fulfill Vision 2030, on which MBS has largely staked his reputation.
"That's the main point that people really miss when they talk about foreign investment in Saudi Arabia. They think Saudi Arabia is looking for money," said Ellen Wald, author of the book Saudi Inc. and president of consulting firm Transversal.
"They like investments in their stock market, but they're looking for partners to expand business there, which is different from just dumping money" into the kingdom, she said.
Earlier this year, Wald said the arrest of Saudi women's rights advocates — even as the kingdom lifted a ban on women driving — may force companies to rethink doing business in the country.
Indeed, the Khashoggi case is just the latest incident to raise thorny questions about Saudi Arabia's human rights record. MBS has overseen a devastating war in neighboring Yemen since 2015, an economic and diplomatic blockade of Qatar, and the mass arrest of hundreds of prominent Saudis.
"You don't need a secret decoder ring to see that these rolling milestones, over time, give the public policy teams at tech titans pause for thought," said Sam Blatteis, former head of Gulf government affairs for Google and now CEO of The MENA Catalysts, a firm that advises tech companies.
While a younger generation of Saudi leaders has "moved mountains" to overhaul domestic industries, international expertise, talent and technology are the ingredients necessary to "turbocharge" Vision 2030, he said.
"The Saudi government recognized the central role that the knowledge economy plays in the country's future: The core theme of Vision 2030 is to build a knowledge economy. And 2030 is only 12 years away," he said.
The entertainment industry is one of several sectors the Saudis aim to develop under Vision 2030 — and one that has seen tangible progress and early signs of success.
After just a few months in the country, Aron said AMC would try to speed up theater openings.
"We have been talking about 30 to 40 in the first three to five years and 50 to 100 by the year 2030, which corresponds with the so-called Vision 2030 program of the Saudi government, and His Royal Highness, the Crown Prince," Aron said in August.
"Today you've heard us change the nomenclature to 50 to 100 theaters in the foreseeable future. We're going to try to move it up faster and increase the theater counts."
AMC Entertainment did not return requests for comment on whether it is reviewing its deal to open theaters with a wholly owned subsidiary of the PIF.
In addition to its deal with AMC, the PIF is partnering with Six Flags, which will develop and design a Six Flags-branded amusement park in Qiddiya, a planned entertainment district in Saudi Arabia. The kingdom has also hosted high-profile WWE wrestling events and concerts featuring international acts, including Toby Keith.
The Khashoggi scandal broke just weeks ahead of Saudi Arabia's second annual Future Investment Initiative, a summit that showcases investment opportunities in the kingdom. A number of partnerships were expected to be announced at the event, but it is now hemorrhaging panelists.
"The timing is perhaps unfortunate for the Saudis because it creates a PR disaster for a lot of Western firms. The Saudis are very unforgiving when they've been slighted so it's a big decision ... to back out," said Karen E. Young, a resident scholar at the American Enterprise Institute who studies the political economy of the Middle East and Gulf nations.
However, she stressed that the ultimate impact of the Khashoggi scandal on strategic partnerships remains to be seen.
"It's very hard to unpack and quantify the impact of news events on investment cycles. Bigger deals have been years in the works and they're not something that you turn off in a day," she said.
To that point, BlackRock CEO Larry Fink said that while he is pulling out of the Future Investment Initiative, his firm will not cut business ties with Saudi Arabia if the kingdom is found responsible for Khashoggi's disappearance.
"We do business in 80 different countries. There are many countries where we may disagree," Fink told CNBC's "Squawk Box" on Tuesday.
However, some firms are backing away from ties with Saudi Arabia.
Virgin Group founder Richard Branson has suspended his ties with the country, pressing pause on a proposed $1 billion investment by the PIF into Branson's space companies including Virgin Galactic. He also gave up his role as director on two Saudi tourism projects.
The Saudis later canceled a deal with Virgin Hyperloop One, a company focused on high-speed transportation, the Financial Times reported. However, sources told CNBC negotiations are still ongoing.
Endeavor, a Hollywood talent agency that has expanded into sports and fashion entertainment, is reportedly seeking a way to exit a deal that would have seen the PIF inject $400 million into the company. Endeavor is the parent company of UFC and the Miss Universe contest.
Saudi Arabia's international partnerships have expanded this year.
The PIF has contributed $45 billion to SoftBank Group's Vision Fund, which has invested in start-ups like Flipkart, DoorDash, Wag and WeWork. MBS recently said Saudi Arabia plans to make another $45 billion investment in SoftBank's second Vision Fund.
During a Saudi summit in New York in March, J.P. Morgan and the Saudi Industrial Development Fund announced a nonbinding agreement to explore opportunities for industrial investment. State oil giant Saudi Aramco announced $10 billion in potential partnerships with 14 U.S. companies, including a memorandum with Google Cloud to develop cloud computing services in the kingdom.
National Geographic also signed an agreement with the King Abdulaziz Center for World Culture to develop content, exhibitions and live entertainment in the kingdom.
In a moment that now appears prescient in light of the disappearance of Khashoggi — a noted critic of MBS — National Geographic CEO Gary Knell addressed concerns about the Saudi market during a panel at the New York summit.
"I think the issues obviously have been around open civic dialogue around certain issues," Knell said.
"I think there's still a bit of a tripwire."