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$2trillion Valuation Touched By Saudi Aramco In Day 2 Of Trading

$2trillion Valuation Touched By Saudi Aramco In Day 2 Of Trading
The Saudi Arabian oil giant Saudi Aramco ultimately crossed the $2 trillion valuation mark as projected by the Saudi Crown Prince Mohammed bin Salman four years ago on the second day of trading as a publicly traded company on Thursday as the company’s shares rose in value.
The value of its shares at the time of the launch of its initial public offering (IPO) on Saudi Arabia's Tadawul stock exchange in Riyadh had propelled the company to be valued at $1.7 trillion which made it the most valuable publicly traded company in the world. It surpassed the $1.2 trillion valuation of Apple Inc. 
On Thursday, the share price of Aramco spiked in trading to reach up to 38.60 Saudi riyals, or $10.29 even before noon which was three hours before trading closed.
Aramco put out for public sale on 1.5 per cent of its total valuation and its shares have mostly been purchased by Saudi investors and local Saudi and Gulf-based funds.
Almost four years ago when the idea of public listing was initially floated by Crown Prince Mohammed bin Salman, the aim was to generate funds from the IPO which would be used by the Saudi government to to raise funds for the kingdom’s sovereign wealth fund, which would then used to create alternative revenue sources for its economy with the aim of creating new jobs and to reduce dependency of the economy on oil exports.
In 2018, initial plan of the Saudi government was to float 5 per cent of the company for the public which it hoped would raise as much as $100 billion. At that time, the Saudi government, the owners of Aramco, had been eyeing launching the IPO in the international markets such as New York or London, as well as Riyadh. That was a signal that global investment was acceptable for the country.
However the government later scrapped the idea because of concerns over possible legal complications in the United States, the possibility of not achieving a $2 trillion valuation and the outrage in the international market against the kingdom following the murder of journalist Jamal Khashoggi in a Saudi consulate in Turkey.
A large section of the international investors were skeptical of the high valuation of the company and showed low interest in the IPO of Aramco because of the relatively lower price of oil, possible impact on the profitability of the company because of climate change concerns and geopolitical risks that could put Aramco’s facilities at risk after the drone attacks in September on two of the company’s facilities that wiped off 50 per cent of the capacity of the company. That also resulted in a huge drop in the overall capacity of Saudi Arabia for oil output for quite some time. Iran was blamed for the attacks on the Armaco facilities by Saudi Arabia and the United States.
The sale as “a proud and historic moment for Saudi Aramco and our majority shareholder, the kingdom,” said Aramco Chairman Yasir Al-Rumayyan describing the sale at a ceremony Wednesday for the start of trading of the company’s shares.

Christopher J. Mitchell

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