The Kingdom of Saudi Arabia has reallocated an 8% stake of its premier oil establishment, Aramco, to its sovereign wealth fund, known as the Private Investment Fund (PIF). This strategic move is part of a broader initiative to revamp the nation’s financial structure and invigorate capital investment to expand its economic base beyond the oil sector.
Subsequent to this reallocation, the PIF boasts a 16% stake in the Saudi Arabian Oil Group, commonly referred to as Aramco. As one of the globe’s corporate giants, Aramco’s valuation stands at approximately $2.1 trillion. There are speculations, based on reports by Reuters, that Aramco may consider offering additional shares to the public in the future.
Announced last Thursday, this share transfer strengthens the PIF’s commitment to fostering new sectors and initiating large-scale real estate ventures, such as the avant-garde metropolis Neom and substantial sports complexes destined to host the 2029 Asian Winter Games among other events. These efforts are part of the kingdom’s ambitious Vision 2030 program. The influx of assets is also anticipated to support the PIF’s potential public offering, amplifying its capacity for raising further capital.
The PIF’s assets under management have reached an impressive $700 billion, despite a reduction in current cash to $15 billion as of September 30, 2023, which marks a decrease of 70% from the preceding year. The investment in Aramco is expected to bolster the wealth fund’s financial reserves, with Aramco’s stocks offering a generous dividend yield of 3.82%. Additionally, the fund has secured $7 billion through two bond issuances this year alone. The PIF is on a trajectory to amass $2 trillion in assets by the year 2030.
“The transfer of Aramco shares to the PIF is a continuation of Saudi Arabia’s long-term initiatives to boost and diversify the national economy and expand investment opportunities in line with Saudi Vision 2030,” Crown Prince Mohammed bin Salman, who serves as the chairman of the PIF and the country’s prime minister, conveyed in an official statement through the state news agency SPA.