Saudi Aramco’s valuation off by half a billion

On Monday, The Wall Street Journal reported that Saudi Aramco may not be worth $2 trillion, citing people familiar with the company’s highly anticipated plan to go public.

Mohammed bin Salman, Saudi Arabia’s deputy crown prince, has said in the past that the company is set to be valued at $2 trillion. However, sources told the Journal that officials working on Aramco’s offering have not been able to draft a model that matches that figure.

The highest valuation that employees were able to come up with was approximately $1.5 trillion, even after accounting for a more favorable tax rate, said the Journal, citing internal documents it reviewed and people familiar with the matter.

If accurate, this means the previous $2 trillion valuation figure is off by a little more than the combined market valuation of Amazon and Netflix. Alternatively, the $500 billion discrepancy is just less than the market capitalization of Microsoft.

Saudi Aramco did not immediately respond to CNBC’s request for comment.

Last month, Reuters said a survey found that fund managers and institutional investors expect the company to have a market valuation between $1 trillion and $1.5 trillion when it sells 5 percent of its shares. Late March, Saudi Arabia gave Aramco a tax cut, which one analyst said could add about $1 trillion to the company’s valuation.

Article written by HEI contributor Lydia Ezeakor.

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