Saudi Aramco valuation hits $2 trillion in boost for Crown Prince
Shares in oil titan Saudi Aramco have soared again, briefly touching the $2 trillion (£1.5 trillion) valuation coveted by Crown Prince Mohammed Bin Salman.
The shares rose as much as 20pc from its float price in its second day trading on the Riyadh stock exchange.
The company confirmed in November that it would go public after months of speculation, with a value of between $1.6 trillion and $1.7 trillion - lower than the Crown Prince desired after international investors stayed away.
At market close, shares had once again fallen just below $2 trillion. Some analysts warned the firm’s true value was much lower.
On its market debut, Saudi Aramco’s stock rose by 10pc, valuing the company at $1.88 trillion and leading analysts to predict that the company would soon hit the vaunted $2 trillion target seen as a "virility symbol” by the Crown Prince.
On Thursday, its second day of trading, the company again saw its stock rise sharply, tipping Saudi Aramco’s value over $2trillion for some time.
At market close, shares had once again fallen just below $2 trillion. Some analysts warned the firm’s true value was much lower.
Investment bank Bernstein gave the stock an “underperform” rating and suggested that its true worth is about $1.36 trillion.
Bernstein's note said Aramco should trade at a discount rather than a premium to international oil rivals.
They warned corporate governance is a major risk as Saudi Arabia will own more than 98pc of the company, effectively giving the royal family overwhelming control.
Last week, the company was able to raise $25.6bn (£19.5bn) in the largest stock market float ever as part of a plan by Saudi Arabia's royal family to sell off its oil assets.
In an effort to reduce the kingdom’s reliance on fossil fuel revenues as the world goes green, the money raised from the sale of a 1.5pc stake in Saudi Aramco will be invested in other industries such as technology.
More than 10pc of the world's oil is supplied by Aramco.
It is thought that domestic investors were heavily encouraged to buy stock on the first trading day, pushing up shares. When the stock settles it could slip sharply.
Jason Tuvey, a senior economist at Capital Economics, said: “There seems to have been a lot of pressure on wealthy families and local investors to support the debut. That’s probably one of the key reasons it has risen so much."
Tadawul has long had a reputation as a wild west market where manipulation is rife.
Former ruler King Abdullah issued a stern warning over suspect behaviour on the exchange in 2012, ordering a crackdown on manipulation and insider trading by members of his own family.
source : The Telegraph
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