What's going on?

Oil firm Saudi Aramco came up short of the $2 trillion valuation it was aiming for in its forthcoming initial public offering, but it can still walk tall: the $1.7 trillion it now wants will still make it the world�s biggest public company (tweet this).

What does this mean?

Aramco, which extracts and refines Saudi Arabia�s oil, is wholly owned by its government. But that�s about to change: the state is selling off 1.5% of the company to investors.

Advisors initially estimated the company could be worth between $1.6 and $2.3 trillion. But it seems international investors think that�s crude arithmetic: they reckon it�s worth nearer $1.5 trillion. Aramco, then, isn�t bothering to persuade them to buy shares. Instead, it�s going to rely on ordinary Saudi investors, who will be able to borrow huge sums from local banks to buy in. Their support should bump it up to between $1.6 and $1.7 trillion, and help it raise over $25 billion � beating Chinese retailer Alibaba to become the biggest IPO ever.

Why should I care?

The bigger picture: It�s a slippery slope.
Over in Russia, oil producer Gazprom Neft reported a third-quarter profit that was 20% lower than last year�s. Lower oil prices caused by an oversupply of American shale oil were to blame. They�ve affected the entire industry, but they might actually be good news for Aramco: its efficient production means it can still make a profit at lower oil prices than its competitors. And that could lead investors to sell their current oil company stocks and buy Aramco instead.

For you personally: The price isn�t right.
As Aramco�s learned, it can be hard to know how much a company will trade for when it makes its shares available. It depends what other investors think it�s worth, which can be hard to guess. That’s one reason prices can plummet on day one of trading � and it might explain why Warren Buffett has called buying an IPO �stupid��