Wait six months for Saudi Aramco’s true value – Breakingviews:
Saudi Aramco is having a good debut as a public company. The Saudi oil giant’s share price jumped 10% to 35.2 riyals ($9.4) on Wednesday as its stock commenced trading on the domestic bourse. The important metric is less how far the current price rises above Aramco’s $1.7 trillion initial public offering valuation, and more what happens six months hence.
There are many reasons why a company that most international investors shunned at the $1.7 trillion issue price has now headed to $1.9 trillion, almost in line with the $2 trillion valuation coveted by Crown Prince Mohammed bin Salman. Saudi only listed 1.5% of the company – half of initial expectations – and while the 4.65 times oversubscription seen in Aramco’s IPO may have been more about bidders ensuring their desired allotment than genuine demand, enough of it will have been real. In opening trading, 25.6 million shares were traded, against 200.5 million of buyer demand.
Local demand is playing a big role. Retail investors, who bought a third of the float, have been incentivised to hold for six months by the promise of bonus shares. Domestic investment funds and wealthy families may also have been encouraged by Riyadh to support the float, the Financial Times reported on Tuesday.
Saudi Aramco is having a good debut as a public company. The Saudi oil giant’s share price jumped 10% to 35.2 riyals ($9.4) on Wednesday as its stock commenced trading on the domestic bourse. The important metric is less how far the current price rises above Aramco’s $1.7 trillion initial public offering valuation, and more what happens six months hence.
There are many reasons why a company that most international investors shunned at the $1.7 trillion issue price has now headed to $1.9 trillion, almost in line with the $2 trillion valuation coveted by Crown Prince Mohammed bin Salman. Saudi only listed 1.5% of the company – half of initial expectations – and while the 4.65 times oversubscription seen in Aramco’s IPO may have been more about bidders ensuring their desired allotment than genuine demand, enough of it will have been real. In opening trading, 25.6 million shares were traded, against 200.5 million of buyer demand.
Local demand is playing a big role. Retail investors, who bought a third of the float, have been incentivised to hold for six months by the promise of bonus shares. Domestic investment funds and wealthy families may also have been encouraged by Riyadh to support the float, the Financial Times reported on Tuesday.
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