By the way, I think he has most of what you have stated in it in another post. Just search for " Investor Risks associated with Saudi ARAMCO IPO" in Google.
I tend to kind of agree that a very high discount rate is appropriate, but, I do not see how Saudis will agree to even discussing 30% let alone 50% discount rate. They will rather quietly go to Institutional Investors Pre-IPO and allow them a major buy in share. There is no doubt that Saudis are unreliable and too many risks at play.
Any DCF model will not directly plug in assumptions. These assumptions impact the Discount Rate (r). Investors look at the same assumptions and may arrive at different Discount Rates.
I think a fair point to add is the fact that Saudi's probably misspoke before the IPO leading to this piercing analysis from various analysts. Perhaps they know that the price is way less than 2 Trillion Dollars and will be happy with it. As someone has already mentioned, there are other risks that need to be considered (some of which the analysis covers)
- Dividend, Taxes and Royalty Whack a Mole - Reduce Dividends, it increases the valuation but, pay back more dividends in the 2nd year back to the majority shareholders. It throws the yearly cash flows into a spin. Investors may start offloading the stock.
- Political Risks i.e a major coup where the royal family is deposed and another government installed.
- Governance Risks - What if Minority Shareholders have no say and no power. What if Assets cannot be seized ?
Add these risks and discount factor should be way higher like 30-40%.
Undoubtedly, they do have plenty of oil and may find more. The political risks and uncertainty around that region is the big problem really. Middle East has so far been stable (atleast the GCC). With Qatar problem, it makes the investors nervous.
https://goo.gl/QnT6gi