DUBAI/RIYADH — Saudi Aramco topped the US$2 trillion target sought by Saudi leader Crown Prince Mohammed bin Salman on Thursday as the state-owned oil firm’s shares soared for a second day, defying some scepticism about their long-term value.

The Saudi Crown Prince has made the Aramco initial public offering (IPO) the centerpiece of his plan to diversify the Kingdom’s economy away from its dependence on oil by using the US$25.6 billion raised to develop other sectors.

But that sum is well below the Crown Prince’s earlier plan in 2016 to raise as much as US$100 billion through a blockbuster international and domestic listing. Riyadh scaled back its IPO plans after overseas investors baulked at the proposed valuation and only 1.5% of Aramco’s shares trade on the Riyadh stock exchange, a tiny free float for such a large company.

Saudi Aramco is the largest, most profitable oil company in the world - but size is not everything

Bernstein analysts

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While the Saudi government hailed a 10% jump in the stock on their Wednesday market debut as a vindication of it long-sought valuation, support is largely from loyal Saudi and Gulf investors, with some analysts saying it is worth less.

Bernstein analysts initiated Saudi Arabian Oil Co (Aramco) shares with an “underperform” rating, estimating its value at around US$1.36 trillion, which compares with US energy giant Exxon Mobil’s valuation of less than US$300 billion.

“Saudi Aramco is the largest, most profitable oil company in the world - but size is not everything,” they wrote, flagging the risk of slow net income growth if oil prices stay flat.

Bernstein said Aramco should trade at a discount rather than a premium to international oil majors, with corporate governance “the key risk” as the Saudi government owns more than 98% of it.

Aramco, whose shares gained the maximum 10% allowed by the Riyadh exchange on their first day of trading, hit 38.7 riyals (US$10.32) on Thursday, before easing to 37.5 riyals, putting its market value at US$2 trillion.

“Initial price action has validated our thesis that Aramco discounted its IPO price to leave upside on the table and allow regional investors to benefit from the listing of its crown jewel,” Zachary Cefaratti, CEO of Dubai-based Dalma Capital, which invested in the IPO, said in a note on Thursday.

“The average institutional investor received less than 1/6th of the shares they bid for in the IPO, and have had to buy shares on the open market,” Cefaratti added.

‘QUICK GAINS’

Aramco’s IPO has become the world’s biggest, topping the US$25 billion 2014 listing of China’s Alibaba, despite limited interest from foreign investors.

It opted instead to sell a smaller proportion of shares and rely mainly on domestic and regional buyers, with some analysts predicting a lag before the Aramco price settles and some investors take profits.

READ MORE: Saudi Aramco raises US$25.6 billion in world’s biggest IPO

“After Aramco hits US$2 trillion, investors will debate: why should it go higher ... while its owners value it at US$2 trillion?” a Gulf analyst who asked not to be identified said.

The analyst added that when National Commercial Bank (NCB) was listed in 2014 its shares rose by the maximum limit for 10 days before investors started selling.

A trader in Riyadh, who asked not to be identified, said that most of the trading was small scale, of 1,000-1,500 shares, “signaling that some retail investors opted to make quick gains” as they were “happy with a 6 riyal per share gain”.