On one hand, its a very attractive $1.8 T valuation to likely cut 45% to sell investors. The problem is it continued to feed pollutive oil/gas, and more broadly, if it is success...then seems there will be substantial more oil sold, e.g. China, India, S Africa, and an undercurrent to keep rewenables like wind/solar with a
back seat" in growth even though KW $$ is on par with gas for the U.S.
With climate change adversely impacting all life on this world and getting worse over time, for people to continue supporting oil they have to be financially tied it – can you say “Saudi Aramco IPO”? “Is Aramco worth $2 trillion?” or is that the right question at all?
Well, the prince should have first said Aramco is an IT company that happens to do the age old business.
Judging from Uber, Lyft - and not to mention We - the sky would have been a limit for its valuation.
The only draw back would have been it is profitable.
If the prince were to declare profits as something nuisance - why the valuation would easily double.
Of course, he may have to ditch dishdasha and worry beads - and go with unkempt hair etc - why even smoke in no smoking zone.
The valuation will then reach stratosphere.
He may want to talk to SoftBank on running up valuations.
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"Is Aramco Worth $2 Trillion?"
It depends what we mean by "worth". Are we talking about the innate worth of Aramco resources, or do we mean the resources' worth after discounting all the risks to which they are exposed. If we mean the latter, I seriously doubt it.
To invest in Aramco, one has to assess how significant are the risks to which the company is exposed. The risks include: 1) a regional war in which Saudi oil fields may become primary targets; 2) a national revolt against the current Saudi regime, followed by nationalization of oil and gas resources; and 3) overestimating Saudi oil and gas reserves, in terms of its actual content as well as the possibility that the oil reserves are geologically a single underground pool, divided by porous partitions but shared by all neighboring countries.
Another major consideration in investing in a fossil fuel resource these days relates to the following questions:
1) how well Aramco would fair if subjected to a world-wide boycott, either because of political issues involving Saudi Arabia or because the company may become a target of green movements as a major contributor to global warming?; and,
2) what happens to the company if global warming actually reaches a point that production, therefore consumption, of fossil fuels are drastically restricted by world bodies?
It is reasonable to assume that any approved world-wide production level will be rationed among all oil producing countries based on their population size.
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Is Amazon or Apple worth a trillion?
The future cash-flows from oil underground seem to be easier to compute scientifically (geophysical simulations and minimum price for a barrel of oil calculated by natural resource economists) than the erratic cash-flows from the tech giants.
Who knows though?
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@Blunt
Amazon and Apple don't have tens or hundreds of billions of dollars of future stranded assets as renewable energy, battery technology, and climate legislation take off.
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They have potential disruptive technologies (yep they are no longer very young), competition from China and Korea (Apple), antitrust legislation (Amazon), tax law changes that will have companies pay taxes on what they earn abroad (Apple), unionization (Amazon) and a myriad of other risks that may come with a Warren administration.
Tough to compare the risks but I think the Apple and Amazon ones are pretty doubting and volatile themselves as well.
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Where's the crucial I.P.O. question about Aramco being a stranded asset in the face of the climate crisis? I mean, isn't that the reason this dinosaur is being dumped onto the market? Saudi Arabia knows it needs to unwind its positions, to diversify and move its economy into more sustainable areas.
If we're to be honest with ourselves and to future generations, the whole filthy industry needs to be wound down.
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I'm always amazed that this question is not asked further. I am more amazed that apparently none of the NYT staff seems to understand that no outside audit of ARAMCO has been made since SA seized the company some forty years ago.
Their "reserves" have not been proven nor examined by any outside independent auditor, an appalling fact that would kill any major deal of this size in the US. but apparently doesn't matter in the world market. I wouldn't buy ARAMCO for fifty cents on the dollar.
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Investing in oil stocks is a long-term loser.
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I would rather invest in Elizabeth Holmes' next project than in this. What would prevent them from declaring my shares as "invalid" at some point in time? These guys murder journalists in embassies, mind you.
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The Saudi royalty controls the "T" in Earnings Before Interest Taxes Depreciation and Amortization. They lowered the tax rate on Aramco in 2017 from 85% to 50% to make this IPO look better than it is.
You won't become a shareholder by buying the IPO. Your money will become a subject of the King. And that tax rate will go right back to 85% or higher when times are tough.
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Is Jared Kushner being rewarded by MBS with "friends & family" priced stock? Perhaps the American people should know.
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Watch h the banks and investors make a queue, and do lip service to responsible investment or climate risk disclosures
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Realistically, it's impossible to reasonably access the reserves and quality of same in this case.
Investing in an enterprise that has been cloaked in secret for decades can be hazardous to one's wealth.
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How can you write an article about valuing the world's biggest oil producer and not mention climate change and the associated risk to the company's valuation ?
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With more and more oil being discovered and it’s use in greater amounts being toxic for the planet the way we use them.
They are selling depreciating assets. They will not allow the world to progress without their pound of salt.
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Read "The Prize" (a great book about oil). It's very dangerous to deal with a government for an asset located in that government's country. They can (and as the book tells, often did) easily renegotiate/change the rules. What would happen if "Saudi Arabia" (the country) imposed a new "oil extraction" tax of $50/barrel on "Aramco" (the company)? Seems like a sucker's bet. On the other hand, if they lock up all the princes until they invest, they'll sell those shares!
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