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Saudi Aramco IPO an offer too good to reject



Saudi Aramco prepares for its public debut on the Saudi Arabian stock Many participants take part in it because Crown Prince Mohammad bin Salman has made them an offer that they can not refuse.

You see, in the legitimate interest of the Saudi government, that the initial public offering of Aramco finds its first launch in Saudi Arabia must be very successful. If they trade outside of Saudi Arabia, the oil company will look more attractive.

To ensure this success, the Saudi government has apparently offered a little ̵

1; I would not call it a compulsion – but perhaps a friendly little, we should say, invitation to invest a boatload of money from the personal coffers of some of the many princes , I would not say that the Saudi government has used exactly what might be called high-pressure sales tactics, but let's just say they offered some princes an offer that they can not refuse. ARAMCO IPO

What this What is worrying is the fact that the first launch of this historical IPO should be a measure of investor interest and a measure of actual valuation. This will ultimately be the world's largest public offer. Therefore, it is imperative that the market rates it fairly. Prince Mohammed believed that a fair value would exceed $ 2 trillion.

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Nevertheless, Prince Mohammed hoped to raise $ 2 trillion for Saudi Aramco probably will not happen. This is despite the Crown Prince's goal of raising oil prices by stifling production and his campaign to win friends and influence people in a charming and effective manner.

According to reports, the world's largest oil company may only be worth $ 1.5 trillion, or even less. Maybe a lot less, even less than a trillion dollars.

That would be a serious ego strike for Prince Mohammed, not to mention a few early investors. In fact, banks involved in the company's IPO have offered large portions of the company's real value, and one bank estimates that this value could only be $ 1.5 trillion, or give or take one trillion.

Other banks reportedly indicated large valuation fluctuations. And it's not just about the size. At some point, investors want to see profits.

While Saudi Aramco is considered the most profitable company in the world, there will still be challenges.

JP Morgan Chase announces this for Saudi Aramco, repaying all their treats and sweeteners, they would need an oil price of 64.2 USD per barrel to reach the breakeven point. After all the incentives have been repaid, the breakeven point would decline over time. This assumes that the company can repay the losses for the entire time the oil drops below that amount. If the oil does not reach that level, will the stock remain attractive? The price is currently $ 57.44 a barrel.

If the oil is not $ 64.2, it will disappoint some of the princes who were encouraged to pump millions of dollars to get some stocks.

That's not to say Saudi Aramco's stock might be great at some point, but the best way to navigate is to allow the market to determine its value. It should not be pumped up by millions of dollars of money that would not exist without a small crown prince's muscle.

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