(Bloomberg) — Saudi Aramco (SE:) jumped for a second day, pushing the oil giant’s value beyond the $2 trillion mark sought by the kingdom’s de facto leader.
The shares climbed by the daily limit to 38.7 riyals at the open in Riyadh.
Aramco raised $25.6 billion in the biggest-ever IPO, selling shares at 32 riyals each and overtaking Microsoft Corp (NASDAQ:). and Apple Inc (NASDAQ:). as the most valuable listed company. The oil producer’s market value surged to $1.88 trillion on its trading debut Wednesday.
The listing was a watershed moment for a business that’s bankrolled Saudi Arabia and its rulers for decades. First floated by Crown Prince Mohammed bin Salman in 2016 with an ambition to raise as much as $100 billion, the share sale was touted as part of a blueprint for life after oil.
Foreign investors largely spurned the offering in part because the stock was too expensive, and it only looks more pricey now relative to dividends and cash flow, said Salih Yilmaz, a Bloomberg Intelligence analyst.
Analysts at Sanford C. Bernstein & Co. say it’s already time to cash out as the value gets too high. In a Bloomberg survey last month, global money managers put Aramco’s fair value at between $1.2 trillion and $1.5 trillion.
Read: The Wall Street Bankers Who Burst Aramco’s $2 Trillion Bubble
If the stock keeps climbing on Thursday that gap to what analysts believe is fair will widen, making a potential international listing harder. Many foreign managers who refrained from buying the shares also cited corporate governance concerns and threats to the company’s facilities.
Still, the debut was cheered by Saudi and Gulf investors, who see the stock price supported by Aramco’s guaranteed dividends, buying by index-tracking funds and the fact that the region doesn’t have any other listed major oil companies.
Aramco’s “$2 trillion valuation is justified due to secured dividend streams,” Arqaam Capital analysts including Rita Guindy and Jaap Meijer wrote in a report on Wednesday in which they initiated coverage with a buy recommendation and price target of 39.20 riyals.
Arqaam expects a gradual increase of 2% annually in the dividend, potentially being topped up by a special payout of $20 billion in the next three years.
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