How to Make a Trillion-Dollar Company

Here's a fun science project. We're going to make a trillion-dollar company. Better strap on your safety goggles for this one.

Take a wildly popular, $450 billion firm that's listed on various stock exchanges around the world, and run an IPO in mainland China, the company's home turf. You don't need to issue a whole lot of shares to make this experiment work, by the way -- something like 2% of the total should do the trick.

Price the shares at a discount, so that they're affordable for the People. You know they're going to bid the heck out of them, so why not score some popularity points with the punters in the process?

Because Chinese investors aren't free to shop around outside the People's Republic, this is their only crack at the company's catapulting shares. As is the case with dual-listed Aluminum Corp. of China (NYSE: ACH) and China Petroleum & Chemical (NYSE: SNP), the share price in other markets has no bearing on the domestic price, so the People will go ahead and bid up the stock more than 150% on the first day of trading. Have the government convert its 87% stake into domestic shares, and voila -- one trillion dollars' worth of market cap.

After the enthusiasm surrounding PetroChina's (NYSE: PTR) oil puddle and the mere announcement of this share listing had subsided, I concluded that the company still had fireworks in its future. Shares proceeded to double in less than two months, with no fundamental change in the business. That is not what I had in mind.

In the real world, the share price of PetroChina has been dealt with rather harshly this week. Compared with the resources of ExxonMobil (NYSE: XOM), this is clearly not a trillion-dollar company. But it's still a pretty expensive stock. PetroChina will have to undertake a ton of work to grow into today's valuation, and it's not going to come cheap. I see no reason to hold the shares today.