Saudi Arabia to Raise $11.2 Billion in Historic Aramco Share Sale

Saudi Arabia to Raise $11.2 Billion in Historic Aramco Share Sale

Saudi Arabia is set to raise $11.2 billion from the Saudi Aramco share sale, supporting Crown Prince Mohammed Bin Salman’s ambitious economic transformation plans.

Saudi Arabia is set to raise $11.2 billion from Saudi Aramco’s mega stock offering, marking the most significant global deal in about three years.

This significant share sale will be crucial in funding Crown Prince Mohammed Bin Salman’s multitrillion-dollar initiative to transform the kingdom’s economy.

Key Details of the Share Sale

The Saudi government will sell nearly 1.55 billion shares at a price of 27.25 riyals ($7.27) per share.

This price represents a six percent discount to the stock’s last close before the deal was announced.

The pricing falls within the average range for similar large offers over the past decade, though it is in the bottom half of the proposed range of 26.70 riyals to 29 riyals, as reported by Bloomberg.

Key MetricsDetails
Total Amount Raised$11.2 billion
Number of Shares Sold1.55 billion
Share Price27.25 riyals ($7.27)
Discount to Last Close6%
Proposed Price Range26.70 riyals to 29 riyals

Aramco shares have faced pressure recently, dropping to their lowest levels in over a year in the days leading up to this massive offer, which has also drained liquidity from the Saudi market.

Funding Ambitious Economic Plans

The proceeds from the share sale will support Crown Prince Mohammed Bin Salman’s ambitious plans to revamp the Saudi economy.

These investments include sectors such as sports, artificial intelligence, tourism, and the ambitious desert project Neom.

The kingdom’s budget has been in deficit for six consecutive quarters, prompting it to raise over $40 billion from local and international markets this year to bridge the gap.

Investor Interest and Market Dynamics

Saudi Arabia witnessed high demand for all shares on offer within hours of opening the books on Sunday.

Aramco’s $124 billion annual Dividend emerged as a significant attraction.

The oil giant has increased its payout by more than 60 percent since its listing.

Anita Gupta, head of equity strategy at Emirates NBD PJSC in Dubai, stated:

“We like Aramco. It sells reasonably, and we recommend it to investors as a three-year strategic investment.”

She added that the stock is becoming more attractive due to an excellent free float, increasing trading volume, and enhancing the dividend yield.

Attracting Foreign Investment

According to Bloomberg News, the deal has garnered significant interest from foreign investors.

Although the exact amount of overseas demand remains determined, these investors put in enough bids to more than fully cover the offering.

Marwan Haddad, managing director and lead portfolio manager for Middle East and North Africa equities at Azimut, highlighted:

“Offering shares with such attractive yields is likely to attract both large institutional clients and retail investors.”

In contrast to Aramco’s IPO in 2019, which saw limited global fund participation, this current sale has spotlighted foreign interest despite a darkening oil market outlook amid solid supply and demand concerns in China.

Economic and Market Context

Despite Aramco boasting the world’s most significant Dividend, its stock is considered expensive compared to major Western oil companies.

This sale coincides with a decline in oil prices in London, which slid below $80 a barrel for the first time since February.

According to the International Monetary Fund, this price is significantly below the nearly $100 that Saudi Arabia needs to balance its budget.

After the offering, the Saudi government will remain the main shareholder, maintaining about 82 percent ownership, while the Public Investment Fund holds a further 16 percent stake.

Coordinators and Advisors

SNB Capital is the lead manager of the share sale, with Citigroup Inc., Goldman Sachs Group Inc., HSBC Holdings Plc, JPMorgan Chase & Co., Bank of America Corp., and Morgan Stanley serving as joint global coordinators. M. Klein & Co. and Moelis & Co. are the independent financial advisers for the offering.

This historic share sale of Saudi Aramco is a significant financial event and a strategic move towards realizing Crown Prince Mohammed Bin Salman’s vision for an economically diversified and robust Saudi Arabia.

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