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Will it last? World’s first $2 trillion company

Damian Wood
  • December 14th 2019, 07:22
  • Saudi Aramco clocks $2-trillion valuation.
  • The oil company becomes the first entity to hit the two-trillion USD mark.
  • Market analysts are not sure how long the valuation will last.

Saudi Aramco shareholders had yet another bullish trading day on Friday when the company’s shares closed off with a 4.55% gain. The Saudi government-owned oil firm on Thursday hit the $2-trillion mark after gaining about $300 billion in market value, adding to its already $1.7-trillion valuation.

The oil producer goes down in history as the first company to hit the two trillion-dollar mark in valuation, with distance rivals Apple and Amazon barely hanging on to the one-trillion bar.

Aramco’s stock gained 10% on two consecutive days before jumping 4.55% on Friday.

The Riyadh stock exchange-listed company marked its first trading on Wednesday, gaining about 10% after issuing the world’s biggest initial public offering since Alibaba’s 2014 IPO.

Aramco, now the most valuable company, recorded a lot of buys from its home country, Saudi Arabia. According to a Tuesday statement by Samba Capital, one of the oil producer’s underwriters, about 97% of the subscriptions came from Saudi Arabia, with only 3% being foreign investors.

Saudi prince’s initial $2-trillion valuation had been thwarted by critics, but it seems he will now have a field day seeing as hardly a week later, he has achieved his widely-protested valuation.

Bernstein Research analysts last week were quick to note that it was “too much, too soon” for the market to place a $2-trillion valuation tag on the oil company, with earnings growth expected to stall coupled minimal crude oil price gains.

They stated said that the company looked “expensive” compared to its rivals, Exxon (XOM) and Royal Dutch Shell (RDSA).

“Aramco should trade at a discount rather than premium to international oil majors. The kingdom still owns more than 98% of the company, they noted, suggesting that investors should be concerned about corporate governance. Bernstein reckons the company is worth as little as $1.4 trillion,” Bernstein Research experts said.

“Aramco could trade in a league of its own for some time, but the stock market is a weighing machine in the long term, and the laws of economic gravity will eventually apply,” they added, recommending selling Aramco shares.

About the author

Damian Wood
Damian Wood
As an experienced trader, I work for myself managing my own small portfolio and also contributing on several investment news sites. I mix my passion for the industry and journalism to bring my readers informative and trustworthy articles.

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