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From my understanding, the high valuation of Saudi Aramco does not seem to stem from them being the best in to industry for processing oil, but rather, from the

From my understanding, the high valuation of Saudi Aramco does not seem to stem from them being the best in to industry for processing oil, but rather, from their access to the richest and cheapest source of oil. This license is their source of making huge profits - i.e. the difference between the cost price versus the market price. To the best of my understanding, Saudi Aramco has no ownership of the oil fields but merely manages them on behalf of KSA. So is there anything impeding KSA from simply selling oil field access to someone else than Saudi Aramco after the IPO, and in effect, eliminating Saudi Aramco's source of profits?

reallymental 7y ago
Why would you sell your goose that lays golden eggs? Even if you think that the goose might be getting older and less fertile, it doesn't make sense. It only makes sense if you know when the goose is gonna run out of eggs. And in this case I'm not sure anyone knows.
- awakeasleep 7y ago
  You missed the point. The goose is the land. The eggs are the oil. The eggs roll into a basket where people can buy them. The basket is saudi aramco. Now that the basket has been sold, why not make a new basket and send over some eggies?
  - aembleton 7y ago
    Because only 1-2% of it is being sold. The Saudi state will still own 98% of the shares.
    - tuberelay 7y ago
      With a small float and Saudi state owning the other 98% it means that high price can be maintained with little inflow, but global passive equity investors are mandated (I think?) to hold a big chunk of this overpriced equity due to the huge market cap. Anyone know if that is correct?
      - currere 7y ago
        According to [1] you can have float-adjusted or market-cap weighted indices. > An example of a company in which float-adjustment comes into play is Amazon (AMZN). The online retail giant's overall market cap is estimated at around $130 billion. However, only about two thirds of its shares are publicly traded. The non-publicly traded shares, controlled by insiders such as founder and CEO Jeff Bezos, would not be included when determining a company's weight in a float-adjusted index. Incidentally, a company's full market cap, including both its float and non-float shares, is used to determine whether it belongs in the index. So it depends on the index. [1] https://www.morningstar.co.uk/uk/news/124023/understanding-passive-funds.aspx https://www.morningstar.co.uk/uk/news/124023/understanding-p...
- thaumasiotes 7y ago
  > Why would you sell your goose that lays golden eggs? > Even if you think that the goose might be getting older and less fertile, it doesn't make sense. Well, if the goose is currently valued at the net present value of the original income stream, it does make sense to sell if its income stream is going to falter. That's a simple case of selling something for more money than it's worth.

reallymental 7y ago

Why would you sell your goose that lays golden eggs? Even if you think that the goose might be getting older and less fertile, it doesn't make sense. It only makes sense if you know when the goose is gonna run out of eggs. And in this case I'm not sure anyone knows.

awakeasleep 7y ago
You missed the point. The goose is the land. The eggs are the oil. The eggs roll into a basket where people can buy them. The basket is saudi aramco. Now that the basket has been sold, why not make a new basket and send over some eggies?
- aembleton 7y ago
  Because only 1-2% of it is being sold. The Saudi state will still own 98% of the shares.
  - tuberelay 7y ago
    With a small float and Saudi state owning the other 98% it means that high price can be maintained with little inflow, but global passive equity investors are mandated (I think?) to hold a big chunk of this overpriced equity due to the huge market cap. Anyone know if that is correct?
    - currere 7y ago
      According to [1] you can have float-adjusted or market-cap weighted indices. > An example of a company in which float-adjustment comes into play is Amazon (AMZN). The online retail giant's overall market cap is estimated at around $130 billion. However, only about two thirds of its shares are publicly traded. The non-publicly traded shares, controlled by insiders such as founder and CEO Jeff Bezos, would not be included when determining a company's weight in a float-adjusted index. Incidentally, a company's full market cap, including both its float and non-float shares, is used to determine whether it belongs in the index. So it depends on the index. [1] https://www.morningstar.co.uk/uk/news/124023/understanding-passive-funds.aspx https://www.morningstar.co.uk/uk/news/124023/understanding-p...
thaumasiotes 7y ago
> Why would you sell your goose that lays golden eggs? > Even if you think that the goose might be getting older and less fertile, it doesn't make sense. Well, if the goose is currently valued at the net present value of the original income stream, it does make sense to sell if its income stream is going to falter. That's a simple case of selling something for more money than it's worth.