Does Saudi Aramco Stand Alone Among Trillion Dollar Valuations?

As of August 2023, Saudi Aramco, the world's largest oil company, was not the only company with a market valuation reaching a trillion dollars. However, its prophecy to become the first and currently the only state-owned company to achieve this milestone is a topic of ongoing debate. While Aramco made headlines in December 2019 for its initial public offering (IPO) and being valued at 2-3 trillion dollars, this estimate was only made by the Saudi Arabian government, and Aramco has not yet floated on the stock market. Therefore, it is technically not worth a trillion dollars yet, and its position on the most valuable companies list is uncertain.

Notable Companies with Trillion-Dollar Valuations

The current landscape of trillion-dollar companies predominantly includes:

Apple Inc. - Valued over a trillion dollars as of August 2018, making it the first U.S. company to achieve this feat. Microsoft Corporation. - Crossed the trillion-dollar mark in 2019, showcasing its dominance in the technology sector. Alphabet Inc. (Google). - Reaching this valuation in January 2020, solidifying its technological leadership. Amazon Inc.. - Briefly hit this mark early in 2020, exemplifying the transient nature of such valuations. Tesla Inc.. - Achieved a trillion-dollar valuation in October 2021, highlighting the rapid growth and market acceptance of electric vehicles.

Market valuations are not static and can fluctuate significantly. For the most current valuation statuses of companies, it is advisable to check reliable financial news sources.

Saudi Aramco's Estimated Valuation and Management Concerns

While Saudi Aramco is estimated to be worth 400 billion (Sources: 'Saudi Arabia 2 Trillion Aramco Vision Runs Into Market Reality'), this places it at a much lower ranking on the list of the world's most valuable companies.

The value of a company on the stock market is an estimation based on its assets, the quality of management, and other factors. In the oil sector, this estimation is particularly volatile due to the fluctuating price of oil. Take, for instance, Providence Resources, an Irish oil company, which saw its share price drop dramatically from 7.12 in 2011 to 0.17 in 2017, despite being valued between 0.36 and 1.66 a share.

Key Factors Influencing Aramco's Valuation

Two primary factors will likely influence Aramco's future valuation:

The Volatile Price of Oil: The international oil market is highly unpredictable, with prices fluctuating significantly. In 2014, oil prices soared to 70-80 dollars per barrel but dropped to 30-40 dollars per barrel in 2021. Aramco's attempts to drive oil frackers out of business by undercutting oil prices had the opposite effect, as frackers improved their techniques and remained profitable. Management and Governance: It is a well-known fact within Saudi Arabia and the oil business that many of Aramco's current management are weak and likely were placed there through family connections during a period of oil crises in the 1980s and 1990s when Western management was ousted. Aramco is making efforts to replace middle management with more capable, younger employees, but it remains to be seen if these changes will be sufficient to boost Aramco's share price.

In conclusion, while Saudi Aramco had an estimated value of 2-3 trillion dollars as of 2019, it has not yet floated on the stock market, and its actual valuation remains uncertain. The market will likely take into account the volatility of the oil sector and any improvements in management and governance before granting a more favorable valuation.