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Aramco Reaches Prince’s $2 Trillion Goal After Second-Day Surge

(Bloomberg) -- Saudi Aramco jumped for a second day, pushing the oil giant’s value beyond the $2 trillion mark that alienated global investors and prompted the kingdom to end up focusing on a domestic listing.The shares climbed by the daily limit to 38.7 riyals at the open in Riyadh before trimming gains. Trading volume surged to 170 million at 10:24 a.m. local time compared with 31.6 million for all of Wednesday.Aramco raised $25.6 billion in the biggest-ever initial public offering, selling shares at 32 riyals each and overtaking Microsoft Corp. and Apple Inc. as the most valuable listed company.The IPO has become synonymous with Saudi Arabia’s controversial Crown Prince Mohammed bin Salman and his efforts to reshape the economy of the world’s biggest oil exporter. But his insistence on the $2 trillion valuation pushed him to lean on local investors and regional allies.While hitting the target would vindicate Saudi officials, it’ll complicate any plans to sell part of Aramco’s shares abroad as originally envisaged by Prince Mohammed in 2016, when he said a dual listing could raise as much as $100 billion.Analysts at Sanford C. Bernstein & Co. said after the first trading day it’s already time to cash out. In a Bloomberg survey last month, global money managers put Aramco’s fair value at between $1.2 trillion and $1.5 trillion.Still, the IPO is a watershed moment for a business that’s bankrolled Saudi Arabia and its rulers for decades. First floated by Crown Prince Mohammed bin Salman in 2016 with an ambition to raise as much as $100 billion, the share sale was touted as part of a blueprint for life after oil.The debut was cheered by Saudi and Gulf investors, who see the stock price supported by Aramco’s guaranteed dividends, buying by index-tracking funds and the fact that the region doesn’t have any other listed major oil companies.Read: The Wall Street Bankers Who Burst Aramco’s $2 Trillion BubbleAramco’s “$2 trillion valuation is justified due to secured dividend streams,” Arqaam Capital analysts including Rita Guindy and Jaap Meijer wrote in a report on Wednesday in which they initiated coverage with a buy recommendation and price target of 39.20 riyals.Arqaam expects a gradual increase of 2% annually in the dividend, potentially being topped up by a special payout of $20 billion in the next three years.(Updates with volume in second paragraph and chart.)\--With assistance from Paul Wallace.To contact the reporter on this story: Filipe Pacheco in Dubai at [email protected] contact the editors responsible for this story: Celeste Perri at [email protected], Claudia Maedler, Shaji MathewFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P. Read More...

Aramco Reaches Prince’s $2 Trillion Goal After Second-Day Surge

(Bloomberg) — Saudi Aramco jumped for a second day, pushing the oil giant’s value beyond the $2 trillion mark that alienated global investors and prompted the kingdom to end up focusing on a domestic listing.

The shares climbed by the daily limit to 38.7 riyals at the open in Riyadh before trimming gains. Trading volume surged to 170 million at 10:24 a.m. local time compared with 31.6 million for all of Wednesday.

Aramco raised $25.6 billion in the biggest-ever initial public offering, selling shares at 32 riyals each and overtaking Microsoft Corp. and Apple Inc. as the most valuable listed company.

The IPO has become synonymous with Saudi Arabia’s controversial Crown Prince Mohammed bin Salman and his efforts to reshape the economy of the world’s biggest oil exporter. But his insistence on the $2 trillion valuation pushed him to lean on local investors and regional allies.

While hitting the target would vindicate Saudi officials, it’ll complicate any plans to sell part of Aramco’s shares abroad as originally envisaged by Prince Mohammed in 2016, when he said a dual listing could raise as much as $100 billion.

Analysts at Sanford C. Bernstein & Co. said after the first trading day it’s already time to cash out. In a Bloomberg survey last month, global money managers put Aramco’s fair value at between $1.2 trillion and $1.5 trillion.

Still, the IPO is a watershed moment for a business that’s bankrolled Saudi Arabia and its rulers for decades. First floated by Crown Prince Mohammed bin Salman in 2016 with an ambition to raise as much as $100 billion, the share sale was touted as part of a blueprint for life after oil.

The debut was cheered by Saudi and Gulf investors, who see the stock price supported by Aramco’s guaranteed dividends, buying by index-tracking funds and the fact that the region doesn’t have any other listed major oil companies.

Read: The Wall Street Bankers Who Burst Aramco’s $2 Trillion Bubble

Aramco’s “$2 trillion valuation is justified due to secured dividend streams,” Arqaam Capital analysts including Rita Guindy and Jaap Meijer wrote in a report on Wednesday in which they initiated coverage with a buy recommendation and price target of 39.20 riyals.

Arqaam expects a gradual increase of 2% annually in the dividend, potentially being topped up by a special payout of $20 billion in the next three years.

(Updates with volume in second paragraph and chart.)

–With assistance from Paul Wallace.

To contact the reporter on this story: Filipe Pacheco in Dubai at [email protected]

To contact the editors responsible for this story: Celeste Perri at [email protected], Claudia Maedler, Shaji Mathew

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="For more articles like this, please visit us at bloomberg.com” data-reactid=”37″>For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.

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