Via CNBC

A Saudi Aramco logo sits on display during the Abu Dhabi International Petroleum Exhibition & Conference in Abu Dhabi, United Arab Emirates, on Nov. 13, 2018.

Christopher Pike | Bloomberg | Getty Images

ABU DHABI, United Arab Emirates ⁠— Saudi Arabia made history this week as it debuted its crown jewel, Saudi Aramco, for public trading on the kingdom’s stock exchange.

Shares shot up to the maximum allowed for the world’s largest-ever IPO at its launch, surging 10% on Wednesday and again on Thursday to briefly hit a valuation of $2 trillion before paring gains. The listing of 1.5% of the kingdom’s state-run oil giant reached a $1.88 trillion market cap on its first day of trading, putting it well above that of Microsoft and Apple.

The astronomic $2 trillion figure, long pursued by Saudi Crown Prince Mohammed bin Salman since he announced his idea of the float in 2016, defied the expectations — and the ridicule — of much of the global finance community.

But weak international interest, suspicions of heavily government-influenced local demand and scrapped plans to book-build outside the Gulf region have raised the question of how genuinely successful the public listing really is ⁠— and whether it could perform similarly if tested in international markets.

“It’s not exactly what you might call a free market price,” John Rutledge, chief investment officer at investment firm Safanad, told CNBC in Abu Dhabi shortly after trading began on the Saudi Tadawul.

“I think it was a managed sale with a lot of government involvement,” said Rutledge, who served as an economic advisor to three U.S. administrations and the government of Kuwait. “They managed creating the book of buyers, but they also determined how many shares were sold. And so with that, you’ve got both levers. You can make the market cap almost whatever you want at that level.”

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In a statement, Saudi Aramco replied to the suggestion saying, “We believe the demand from a broad base of individual investors and such a wide range of institutions reflects trust in our long-term strategy.”

After shares began trading Wednesday, Aramco CEO Amin Nasser told CNBC that the initial pricing of 32 riyals per share ($8.53) “was agreed based on full analysis and evaluation” and that the IPO on the Tadawul is “a sign of how strong the stock exchange is.”

Nasser noted that local demand for shares was five times oversubscribed and said the listing “embodies Vision 2030,” the agenda set out by the crown prince to diversify the Saudi economy.

Still, market and regional analysts were quick to point out that the listing fell short of the crown prince’s grand vision, which initially targeted an international listing. The kingdom had to rely predominantly on local investors after canceling roadshows in London and New York due to paltry foreign investor interest.

“It’s a success on paper. They delivered on a complicated IPO, the largest in the world,” said Ayham Kamel, head of the Middle East and Africa practice at Eurasia Group.

“But the key risk facing Mohammed bin Salman is that a small IPO does not really move the needle on his diversification program, even if readjusted as part of a new Vision 2030. He needs to sell more of the company and begin to attract foreign investors.”

Saudi Arabia’s recently announced 2020 budget revealed a budget deficit increase to 6.4% of gross domestic product from 4.2% in 2019, as its economy feels the pain of fiscal tightening and lower oil prices. The International Monetary Fund says Saudi Arabia needs oil at $78 a barrel to balance its budget ⁠— a level not seen in five years, and far from the $58 to $63 range of the last few months. Several energy forecasters see oil reaching only $70 a barrel by the end of 2020.

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Amin H. Nasser, President and CEO of Aramco, rings the bell during the official ceremony marking the debut of Saudi Aramco’s initial public offering (IPO) on the Riyadh’s stock market, in Riyadh, Saudi Arabia, December 11, 2019.

Saudi Aramco | Reuters

For Ellen Wald, president of Transversal Consulting and author of the book “Saudi, Inc.,” the share price jump Wednesday morning wasn’t surprising.

“The 10% rise in share price upon opening isn’t unsuspected, but given all the news and what we know about the original investments, it’s inevitable to suspect that there is the heavy hand of government behind all of this,” she told CNBC.

Wealthy Saudi families were in some cases pressured by the government to buy shares, and the crown prince tapped Saudi and regional institutions to pump up demand, according to four sources close to the families in question, who spoke anonymously due to the sensitive nature of the topic.

The real test, experts say, will be how the company performs when traded on an international exchange ⁠— if that ever happens.

“At some point when it’s trading in the Nasdaq or someplace, you lose the ability to manage the sale,” Rutledge said. “And so to me, it’s meaningful if you see it actually spread around the world like a virus. That will tell you that it’s real. The trading where it is right now, it doesn’t tell you an awful lot.”