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Saudi Aramco Falls To Lowest Since IPO As Regional Shares Sink

The mood is sour, to say the least.

Mideast shares fell on Sunday, as the sour mood from Wall Street and this weekend’s virus headlines conspired to push equities in the region lower.

Not surprisingly, Aramco is under pressure. The shares fell 0.6%, to the lowest since the IPO. It marked the first time the stock has traded under SAR34 since going public.

Although still nearly 6% above the IPO price, the world’s most profitable company has faded steadily since peaking shortly after the overwrought opening in December. The company hit Crown Prince Mohammed’s $2 trillion valuation “target” on December 12. In the top pane, you can see what’s happened since:

More broadly, Saudi shares fell 1% Sunday. OPEC and its allies are considering bringing forward their next meeting in order to discuss measures aimed at supporting oil prices as the coronavirus threatens to derail global growth and crimp travel plans.

And yet, you’ll note from the visual that Aramco had a fairly smooth ride in January considering the circumstances. The death of Qassem Soleimani could well have prompted more attacks on the company’s infrastructure and it still seems likely the Houthis (in Yemen) will continue to target Saudi interests in perpetuity.

And then there’s oil itself, which had its worst month since May in January, and suffered the worst start to a year since 1991 as demand jitters swamped supply disruptions and Mideast tumult to push prices 16% lower.

But thanks in part to the allure of big dividend payouts and “bonus shares” promised to retail investors, Aramco remained relatively stable (yellow box in the visual).

Some of that is almost surely attributable to state-backed buying. It’s simply unthinkable that the monarchy would allow the shares to fall too far, too fast.

Elsewhere in the region on Sunday, Israeli shares tumbled as much as 3.9% before trimming losses. The main gauge is down more than 5% since the virus scare began in earnest.


8 comments on “Saudi Aramco Falls To Lowest Since IPO As Regional Shares Sink

  1. What special kind of moron would buy an IPO in a war zone?

    • well, the kind that wants their investment to fall a relatively tiny amount in January while the world’s oil majors tumbled and crude crashed 16%. Hopefully you read the whole article. Aramco shares were by far the best-performing in January among major oil producers. Among other things, that’s because the monarchy isn’t going to let the shares fall. This is something Westerners still have a hard time accepting about stocks in places like Saudi Arabia and mainland China. If the powers that be don’t want them to fall, they won’t fall. Or if they do, they’ll be halted indefinitely. I understand why that’s maddening to some folks, but that’s just how it goes. It reminds me a little bit of all these people who, for the past 10 years, have insisted that central banks shouldn’t be “allowed” to prop up equities. Meanwhile, the Nasdaq soared 700%. At what point does it become insane to worry about what “should” and “shouldn’t” be allowed when the reality is, you can’t do anything about it?

      • If that’s the case, I’ll just wait for our central banks to start buying FAANG and stop worrying.
        And invest in new REITs in Palestine.

      • The problem with that line of thinking is the assumption that “the powers that be” can control a system as complex as financial markets. If you continue investing on the assumption that these entities have got your back and that multiples can expand indefinitely, the danger is they lose control and you’re left holding the bag. It is a tough dilemma for any rational investor in this day and age.

        • Well, of course. But the Nasdaq is up 700% since March of 2009. At what point does it no longer matter? I mean, this is like telling someone that bought Bitcoin at $100 that it’s going to zero one day (something I do all the time, by the way). That hypothetical Bitcoin investor is totally justified in looking at me and saying something like: “What you’re saying is correct, but at the same time it’s meaningless, because I’m up a ~million percent already, and I’ve booked half those gains, so what do I care what happens next?”

          Point being, the people who have spent the last 10 years blogging and talking about how the “powers that be” are on the verge of “losing control” have been flat-out wrong if you define “right” and “wrong” by central banks’ ability to keep financial assets afloat.

          Don’t get me wrong. I’m on your side from a theoretical perspective. But at the same time I’m still happy with the money.:)

          • Don’t get me wrong too, I am continuing to invest in these treacherous waters and have enjoyed good returns this far, especially as a long-equities-only kinda guy.

            While I am not the kind of investor who “books” gains (I tend to hold indefinitely as long as I can see future value accretion in my investments), it becomes hard to deploy capital not knowing when the punch bowl will be taken away either due to policy ineffectiveness/failure or other exogenous events.

            There is a point at which these things come to a head – while it is nigh impossible to predict when that will be, I can say one thing with a high probability of being correct – we are much closer to the end than the beginning of feeling the ill effects of unconventional monetary policy.

  2. Oil is over. Alternatives can compete on price and millennials and Gen Z — and the funds and endowments they eventually manage — don’t want anything to do with major integrateds (or fossil fuels , for that matter). The Saudis are sitting on a depreciating asset and were smart to get the IPO out when they did. But this is dead money, imo.

    • The problem for the Saudis is that they didn’t “get out” in the IPO. They sold less than 2% of the company in the IPO. It is the start of their exit plan, not the finish. If the folks who bought the first 2% take huge losses, selling the next 98% might be more difficult.

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