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Money Stuff: Soon Aramco Will Have a Price

Fischer Black famously defined an efficient market as “one in which price is within a factor of 2 of value, i.e., the price is more than half of value and less than twice value,” and I certainly would not aspire to any greater precision. By that standard, the initial public offering of Saudi Aramco is going great:

Seems fine, right? Let me be a little bit cynical here and point out that if you think Aramco is worth, say, $1.22 trillion, and your bank is underwriting the IPO, and you are aware that Saudi Crown Prince Mohammed bin Salman strongly believes that it is worth $2 trillion, you can without sacrificing too much of your integrity say “we think it is worth between $1.22 trillion and $2.27 trillion” or whatever. Then if it turns out to be worth $1.2 trillion you can say you were right (it was in your range!), while you can also tell the prince that you agreed with and supported his valuation (also in your range!). Oh and sure you will get made fun of because that range is more than a trillion dollars wide, but you should not worry about this too much because (1) investors are not coming to you for a specific valuation so much as for information and analysis and all the usual services of sell-side investment research and (2) you are within the Black interval, it’s fine, whatever.