Saudi Aramco shares gapped up sharply on the second trading session, with the state-owned oil company hitting Prince Mohammad Bin Salman’s (MbS) $2 trillion valuation target, reported Bloomberg.
Shares jumped almost 10% in the first 90 minutes of trading Thursday, breaching the 37.51 SAR, the level which values Aramco over $2 trillion.
Gains in the session above $2 trillion in valuation was hard to justify for the market as prices faded in the back half of the session and closed at 36.75 SAR, or below MbS’ target.
Aramco shares soared limit-up on IPO day, Wednesday, reaching a valuation of $1.88 trillion, higher than any other publicly traded company in the world. We explained how leading up to the IPO, Saudia Arabia engineered the mechanics to orchestrate a massive stock pump.
Since Aramco only sold a tiny 1.5% sliver in the company, the kingdom’s Public Investment Fund (PIF) could easily manipulate the price with such a small fraction of the public stock. On top of that, since many foreign institutions disagreed with valuations, and overlooked the deal, the kingdom encouraged the county’s wealthiest families to buy stock and offered cheap loans for purchases.
Analysts at Sanford C. Bernstein & Co. warned that investors need to cash out of Aramco because of valuations concerns.
Several months ago, Wall Street banks valued Aramco at $1.2 to $1.5 trillion, now trading around $2 trillion.
The kingdom’s stock pump has artificially boosted valuations of Aramco that are likely not to be sustained, but, in the meantime, it makes for good press in Saudi papers.
Some local media outlets said, “Aramco at the top of the world” and “A dream come true.”
Bernstein analysts disagreed on valuations but didn’t dispute the fact the company is the “most profitable oil company in the world.”
However, macroeconomic headwinds of a slowing global economy, dropping Chinese demand and declining fuel consumption across the world could put down pressure on oil prices, resulting in lower Aramco valuations.
Finally, for those who are exuberant about this state-owned energy company’s massive valuation, don’t forget what happened the last time a gigantic energy firm came public at over $1 trillion market cap…
It perfectly top-ticked the S&P.
Thu, 12/12/2019 – 09:00
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Author: Tyler Durden