Saudi Arabia’s national oil company may be worth half the $US2 trillion (£1.61 trillion) valuation suggested by the country’s officials, according to an in-depth report by the Financial Times.
The kingdom is due to list shares in Saudi Aramco in both Riyadh and at least one other foreign stock exchange by 2018, selling up to 5% of what will likely become the world’s biggest company by market capitalisation.
The valuation of those shares has been the subject of intense debate. As the FT points out, the company is yet to disclose financial details such as sales or profits.
Deputy Crown Prince Mohammed bin Salman, who is in charge of the Saudi Arabia’s economic policy, has said the IPO will value Aramco at $US2 trillion or more, which is around two-thirds the size of the entire London Stock Exchange.
But, according to FT estimates using valuations from previous shares sales of British Petroleum and Brazil’s Petrobras, the correct valuation should be no more than $US1.1 trillion.
The analysis chimes in with the views of investors and fund managers, according to a survey by regional investment bank EFG Hermes last month. That study found that most investors see Aramco having a market capitalisation of $US1 trillion to $US1.5 trillion when it sells shares to the public.
The survey found 39%of respondents predicted the market would value Aramco at between $US1 trillion and $US1.5 trillion, with 36% expecting a valuation below $US1 trillion.
Around a quarter of the 510 participants expected a figure above $US1.5 trillion, the bank said.
Policy decisions by Saudi authorities, including which of Aramco’s huge selection of assets will be included in the share sale, will have a big effect on the overall price and valuation.
You can read the full FT analysis here.
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