In a significant move within the business media sector, Saudi Arabia is on track to accumulate in excess of $11.2 billion through the secondary offering of shares in the state-owned petroleum titan, Aramco. The shares have been priced at the lower spectrum, at 27.25 riyals ($7.27) per share, according to sources acquainted with the situation.
At present, Aramco has withheld comments, and requests for statements from the Saudi government’s communications office have yet to receive responses.
The infusion of foreign investment remains an elusive target, yet it stands as a crucial component of Crown Prince Mohammed Bin Salman’s ambitious initiative to wean the kingdom’s economy off its oil dependence. This share offering emerges as the latest barometer of the kingdom’s capacity to draw in international capital, although the extent to which it has managed to pique global investor interest remains uncertain.
Labelled ‘Vision 2030’, the Crown Prince’s strategy has injected billions into diverse ventures, from electric vehicles to cutting-edge urban developments in the desert, largely channelled through the Public Investment Fund (PIF).
Insiders and market analysts speculate that the PIF stands to be a principal recipient of the proceeds from this share sale. However, it is also suggested that these funds might contribute to bridging the fiscal gap projected in this year’s national budget.
The share pricing represents a discount of nearly four percent from Aramco’s previous day’s closing price, setting the company’s valuation at about $1.76 trillion, slightly lower than its $1.83 trillion market capitalisation based on the prior day’s stock price.
The Saudi government aims to divest approximately 0.64 percent of its stake in Aramco. This figure could increase to 0.7 percent if the greenshoe option is activated, which permits bankers to employ additional shares for price stabilization post-offering.
Should this option be fully utilized, Aramco’s fundraising could reach a total of roughly $12.36 billion. The country previously triggered a greenshoe option following its 2019 initial public offering (IPO), amassing $29.4 billion and securing the record for the largest IPO globally.
Banks have commenced accepting orders for the deal, and Aramco’s shares are slated to commence trading on the upcoming Sunday on Riyadh’s Saudi Exchange.
Known internally as Project Bond, the offering has been in development for numerous months. It represents a strategic effort to attract a wider investor demographic following Aramco’s landmark IPO. This transaction also stands as a litmus test for the appeal of Saudi markets, particularly after mixed reactions from international investors during the IPO, which was marked by apprehensions over valuation, state control, and the broader shift away from fossil fuels.