International investors have played a significant role in Saudi Aramco’s recent secondary share offering, which is poised to infuse $11.2 billion into the oil behemoth’s coffers. This influx of capital is expected to catalyze the funding of expansive projects within Saudi Arabia, such as the construction of resorts and stadiums, which are integral to the country’s transformation plan aimed at reducing its reliance on oil revenue.
A statement released by the company highlighted that a substantial portion of the shares designated for institutional investors were secured by entities outside of Saudi Arabia. Confidential sources revealed that international investors claimed approximately 58 percent of the offering, marking an increase from the 23 percent stake they held during Aramco’s 2019 initial public offering – the largest in history.
The diverse global reach of the offering was evident, with substantial participation from the United States and the European Union, alongside investors from Japan, Hong Kong, and Australia. On May 30, Aramco announced its intention to sell 1.545 billion shares, equating to around 0.64 percent of its total issued shares, on the Saudi stock exchange.
This share sale was regarded as an important measure of global investment interest, coming more than halfway through the kingdom’s ambitious Vision 2030 initiative. Vision 2030’s scope is mirrored in the giga-projects it envisions, such as NEOM, a planned high-tech mega-city set to emerge from the desert.
Aramco set the offer price at 27.25 Saudi riyals per share, which was on the lower side of their previously announced range. As of the last trading session, Aramco’s shares closed at 28.30 Saudi riyals, valuing the company at approximately $1.83 trillion. Trading commenced on Sunday with shares opening at 27.95 Saudi riyals and reaching 28.15 Saudi riyals by mid-morning.
Approximately 10 percent of the shares were made available to individual investors, attracting 1.3 million subscribers. An insider indicated that the retail segment was oversubscribed by 3.7 times, with combined institutional and retail investor demand surpassing $65 billion. The source emphasized the robust international interest, which surpassed that seen during the IPO.
This secondary offering appears to be the most substantial in the EMEA region since 2000, the largest global equity market transaction since 2021, and the most significant offering in the Middle East since Aramco’s own IPO, which raised $29.4 billion. Last year, Aramco introduced a performance-based dividend to complement its base dividend policy.
Following the announcement of base dividend payments totaling $20.3 billion for the first quarter and a subsequent performance-linked dividend of $10.8 billion for the second quarter, investor appetite for Aramco shares has been strong. Experts, such as Ellen Wald from the Atlantic Council, have noted the attractiveness of Aramco shares, especially given the consistent dividend payouts.
As the world’s foremost crude oil exporter, the Saudi government holds an 81.5 percent stake in Aramco after the secondary share sale, with the kingdom’s sovereign wealth fund and its subsidiaries controlling about 16 percent. Aramco’s financial performance has been noteworthy, with record profits in 2022 following the Ukraine conflict, which contributed to Saudi Arabia’s first budget surplus in nearly a decade. However, the company’s profits did decline by a quarter last year due to lower oil prices and production cuts.