THE CONTRIBUTION OF REAL OPTIONS TO THE SHARE PRICE OF SASOL LTD

Brown (1997: ix) stated: “Fundamental changes were under way in the world ofbusiness… The accelerating pace of change is real… With this shift, we arefinding many of our background assumptions and time honoured businessmodels inadequate to help us understand what is going on, let alone how tocompete”. The purpose of the research was to test real options’ theory in theSouth African oil and gas sector of the market. The largest listed company bymarket capitalization in this sector was Sasol.The methodology used to conduct the study consisted of three phases. Adetailed review of literature, a case study of Sasol’s GTL operation in Qatar anda survey of all South African market analysts that tracked Sasol’s share pricewas undertaken.The findings of this report supported the propositions offered by the research thatthe market value of Sasol did not reflect any embedded real options’, Sasol’sshares were not fully valued, market analysts did not understand the concept ofreal options’, there was a real option within the Qatari GTL division of Sasol andthe GTL industry was embedded with real options’.This report showed that South African market analysts did not use real options’and that acceptance by market analysts will serve as a catalyst for morewidespread corporate use within South Africa.