Is Saudi Aramco overrated

Google is now also worth billions

Google parent Alphabet has managed to reach a market value of one trillion dollars. Apple, Microsoft and Saudi Aramco are rated as highly. But how does it work?

Vienna / New York. Now Google parent Alphabet has also risen to the ranks of trillion companies. On Thursday evening, the search engine company reached a market value of one trillion dollars (English: "trillion"). That corresponds to 900 billion euros.

Investors should like the strengthened role of Google boss Sundar Pichai. He should also take over the executive role in the parent company. The Alphabet Group is primarily dependent on Google's advertising income, other branches of business (self-driving cars, fiber optic networks, genetic engineering) play a subordinate role.

Aramco: Only part of the stock exchange

Alphabet is now in good company: the iPhone manufacturer Apple has a market capitalization of 1.38 trillion dollars, the software giant Microsoft 1.27 trillion dollars.

An even larger company is currently only listed in Riyadh: the oil company Saudi Aramco, which went public in December, has a market capitalization of the equivalent of 1.87 trillion dollars. But only 1.5 percent of the shares were listed on the stock exchange. The other 98.5 percent have never been traded. The price of 1.5 percent is only extrapolated to the entire company. Online retailer Amazon had also reached a trillion dollar market value in mid-2018, but is currently only the fifth largest listed company in the world with 931 billion dollars.

The market value is calculated by multiplying the current price by the number of all shares in the company. If shares are traded at a higher price, the notional value of all shares in the company increases. Investors who have not traded their paper for a long time also see a higher value in their portfolios. If one of them sells, he will actually get a price in this amount. If many want to sell at the same time, that would push the price down.

In other words, Alphabet is valued at $ 1 trillion because a few stocks recently changed hands by more than $ 1,450. If all Alphabet shares had traded at that price, it would make a trillion. In fact, no one has ever raised a trillion dollars to buy a company like Alphabet. Hardly anyone could afford that either. The richest private individual in the world - according to Bloomberg, Amazon founder Jeff Bezos - has only $ 117 billion in assets, and Bezos holds most of that not in cash, but in Amazon stocks.

But even if an institution or a large corporation actually managed to find banks to finance the takeover of a company like Alphabet with loans, the buyer would probably have to put down far more than a trillion dollars. Takeover rumors usually drive the price strongly.

Technology rally in progress

The enormous rise in prices of Apple, Google, Microsoft and Facebook in the past few months is causing some investors a headache. The US portfolio manager Paul Meeks believes, for example, that Apple shares are overvalued by at least $ 100. Most recently it was trading around $ 315. Investors are calm about such warnings. With price increases of five (Microsoft), seven (Apple) or eight percent (Facebook, Alphabet), the technology giants are again above the average of 2.7 percent this year.

("Die Presse", print edition, January 18, 2020)