What’s Going On Here?Saudi Aramco towered over the rest on Wednesday: its almost $26 billion initial public offering (IPO) was the world’s biggest. What Does This Mean?Saudi Aramco initially wanted to sell $100 billion worth of shares, and the company’s advisers expected global investors to give the entire company a $2 trillion valuation – as well as the coveted title of world’s most valuable public company. But when those investors shrugged off the opportunity, Aramco turned to Saudi Arabia’s. Sure, that meant the company sold fewer shares at a lower valuation than it had hoped, but its share sale was still the biggest ever.
Aramco’s shares rose 10% on Wednesday – the maximum possible, given limits placed on how much Saudi-listed shares can move in a single day. That rise made it worth almost $1.9 trillion, and a further increase before the end of the week could see it cross the $2 trillion mark after all (tweet this). Why Should I Care?For markets: The value of scarcity.
Despite its record-setting IPO, Saudi Aramco only actually sold off 1.5% of the company’s shares. Compare that to the more-than 80% of Apple, Amazon, and Alphabet shares available on the stock market, and Aramco’s popularity suddenly makes a lot more sense. Plus, if ordinary retail investors hold onto their current stakes, they’re reportedly in line to receive extra shares. Funds that track emerging market indexes – groups of closely related stocks that Aramco will join – are scrambling to buy into the company too, pushing demand and Aramco’s share price even higher.
Zooming out: Chevron feeling green.
American oil company Chevron slashed the value of several parts of its business by $11 billion this week. It’s blaming the too-high supply of oil and natural gas, which has caused the prices of both – and therefore the value of Chevron’s businesses – to fall. But investors didn’t seem to mind: its stock fell just 1%. |
