Saudi Aramco is poised to raise at least $11.2 billion through a significant stock offering, the largest global deal of its kind in three years.
This strategic initiative is designed to support the Saudi government’s ambitious plans to transform the kingdom’s economy.
The government plans to sell nearly 1.55 billion shares at a price of 27.25 Saudi riyals ($7.27) each, insiders revealed on condition of anonymity.
This pricing represents a 6% discount from the stock’s last close of 29 riyals prior to the announcement.
Despite being in the lower half of the anticipated range of 26.70 to 29 riyals, the shares have been trading below the top end since the announcement. They closed at 28.30 riyals on Thursday, having hit a year-low earlier in the week.
This secondary offering is a rare event in the region, with previous similar deals involving Saudi Telecom Co. and Tadawul Group Holding, both of which were priced at roughly a 10% discount.
The high demand for shares was evident within hours of the books opening on Sunday, with significant interest from foreign investors.
Although exact figures on overseas demand were not disclosed, it was reported that foreign bids were sufficient to fully cover the offering.
This marks a notable shift from Aramco’s initial public offering (IPO) in 2019, where global investor participation was minimal, forcing the government to rely heavily on local investors.
This time, the substantial foreign interest underscores a renewed confidence in the Saudi market, even as the global oil outlook remains uncertain due to fluctuating supply and demand dynamics, particularly from China.
A major selling point for this offering is Aramco’s impressive $124 billion annual dividend, the largest globally, making the stock highly attractive despite being priced higher than major Western oil companies.
The dividend alone exceeds the combined returns of the next eight largest payouts worldwide.
The Saudi government, led by Crown Prince Mohammed bin Salman, is leveraging this stock sale to fund its Vision 2030 economic diversification plan, aimed at reducing the kingdom’s dependency on oil revenue.
The International Monetary Fund (IMF) has indicated that Saudi Arabia needs oil prices to be around $100 per barrel to support its ambitious spending plans. Currently, crude oil prices hover around $83 per barrel, with recent dips below $80.
The kingdom remains the principal shareholder of Aramco, holding about 82% of the company, while the Public Investment Fund (PIF) retains a 16% stake.
This sale will not alter the government’s majority ownership.
The share sale is being managed by SNB Capital, with Citigroup Inc., Goldman Sachs Group Inc., HSBC Holdings Plc, JPMorgan Chase & Co., Bank of America Corp., and Morgan Stanley acting as joint global coordinators. M. Klein & Co. and Moelis & Co. are serving as independent financial advisers.
This major stock offering is not just a financial maneuver but a pivotal component of Saudi Arabia’s broader strategy to reshape its economic landscape and secure a more diversified and sustainable future.
The final pricing will be announced on Friday, setting the stage for a new chapter in the kingdom’s economic evolution.
