The colossal equity sale by Saudi Aramco is poised to generate a minimum of $11.2 billion, marking the largest fundraising of its kind globally in the past three years. This influx of capital is intended to support the kingdom’s ambitious economic diversification initiatives that require substantial investment.
Despite reaching out, Aramco representatives offered no immediate commentary on the pricing, which was initially disclosed by a major financial publication.
The scenario contrasts sharply with Aramco’s 2019 initial public offering, which saw limited interest from global funds, compelling the government to depend heavily on domestic investors. Current sale dynamics have shifted, with foreign participation garnering attention in the midst of a challenging oil market affected by supply concerns and China’s fluctuating demand.
One of the key attractions for investors this time is Aramco’s substantial annual dividend payout of $124 billion, which stands as the highest worldwide. Nonetheless, the company’s share value is comparatively high against its Western counterparts in the oil sector.
Ending the trading week on a downward note, Aramco’s shares were priced at 28.30 riyals, witnessing a 2.4% drop. Preceding the offering, share prices dipped to their lowest in over a year, with this sale anticipated to be the most sizable since Rivian Automotive Inc’s 2021 debut on the stock market.
In the context of the region, secondary offerings are not a commonplace event. Past transactions in Saudi Arabia include those by Saudi Telecom Co. and Tadawul Group Holding, the entity behind Riyadh’s stock exchange, both of which concluded sales at an approximate 10% discount.
Proceeds from the sale of state oil giant Aramco’s shares are earmarked for Crown Prince Mohammed bin Salman’s extensive economic reform plans. According to the International Monetary Fund, the kingdom’s vast expenditure blueprint necessitates a near $100 per barrel oil price to be sustainable.
However, oil prices, which last peaked around the desired levels in late 2022, have recently slumped to below $80. The Organization of Petroleum Exporting Countries and its allies have decided to stretch certain supply restrictions into 2025 but also proposed a plan to incrementally ease some voluntary reductions starting from October.
The Saudi government retains a significant majority ownership of approximately 82% in Aramco, with the Public Investment Fund holding an additional 16%. Following the offering, the kingdom will maintain its status as the principal shareholder.
SNB Capital has taken the helm as the lead manager for the share sale, collaborating as a joint global coordinator alongside prominent financial institutions such as Citigroup Inc., Goldman Sachs Group Inc., HSBC Holdings Plc, JPMorgan Chase & Co., Bank of America Corp., and Morgan Stanley. Additionally, M. Klein & Co. and Moelis & Co. have been appointed as independent financial advisers for the offering.