- The sale of Aramco shares saw immense demand, surpassing the available stock just hours after the sale began.
- The offering could raise up to $13.1 billion, with institutional orders being accepted through Thursday and pricing the following day.
- The proceeds will support the Public Investment Fund, central to Saudi Arabia’s economic diversification efforts.
- Aramco shares closed at 28.45 riyals on Sunday, and the offering could raise nearly $12 billion if sold at the top price range.
- Top global investment banks and local firms are managing the sale, with 10% of shares reserved for retail investors.
- The sale coincides with OPEC+’s decision to extend oil output cuts into 2025, aiming to stabilize the market.
Saudi Arabia’s recent sale of shares in the oil giant Aramco has sparked immense interest, with demand surpassing the available stock just hours after the sale began on Sunday.
This highly anticipated deal, which could raise to $13.1 billion, is seen as a significant test of international investors appetite for Saudi assets.
Timeline and Expectations
Institutional orders for the shares will be accepted through Thursday, and the banks involved will price the shares the following day.
Trading is expected to commence next Sunday on Riyadh’s Saudi Exchange.
This offering will serve as a key indicator of Riyadh’s attractiveness to foreign investors, a critical element of Saudi Arabia’s broader economic diversification plan.
Strategic Economic Overhaul
Crown Prince Mohammed bin Salman has emphasized the need for Saudi Arabia to reduce its reliance on oil, referring to this dependency as an “oil addiction.”
The proceeds from the share sale are expected to support the sovereign wealth fund, the Public Investment Fund (PIF).
The PIF has been instrumental in driving the kingdom’s ambitious economic agenda, investing billions in various sectors including sports and futuristic desert cities.
Current Market Performance
On Sunday, Aramco’s shares closed at 28.45 riyals ($7.53), about 2% lower than the previous session. Saudi Arabia is offering around 1.545 billion Aramco shares, or 0.64% of the company, priced between 26.7 to 29 riyals per share.
This pricing could raise nearly $12 billion if the shares are sold at the top end of the range. The high demand for these shares was confirmed by one of the banks managing the deal, which noted that indicated demand exceeded the deal size.
Potential Increase in Share Offering
Banks have the option to increase the offering by approximately $1 billion. If all shares are sold, the Saudi government’s stake in Aramco, the world’s leading oil exporter, will decrease by 0.7%. This reduction is a strategic move to attract more international investment.
Key Players
Top global investment banks are managing the sale, including Citi, Goldman Sachs, HSBC, JPMorgan, Bank of America, and Morgan Stanley.
They are joined by local firms such as Saudi National Bank, Al Rajhi Capital, Riyad Capital, and Saudi Fransi. Independent financial advisers for the deal include M. Klein and Company and Moelis.
Additional support comes from UBS Group’s Credit Suisse Saudi Arabia unit, BNP Paribas, Bank of China International, and China International Capital Corporation.
Retail Investor Involvement
Approximately 10% of the new share offering is reserved for retail investors, contingent on demand.
This inclusion aims to diversify the investor base and increase public participation in the kingdom’s economic ventures.
Context of the Sale
The share sale coincided with a meeting of the OPEC+ group of oil producers, which decided to extend most of its substantial oil output cuts into 2025.
This move aims to stabilize the market amid sluggish global demand growth, high interest rates, and increased U.S. oil production. Some OPEC+ ministers met in Riyadh, while others joined the discussions online.
OPEC+, led by Saudi Arabia and Russia, has been reducing output by 5.86 million barrels per day (mbpd), which equates to about 5.7% of global demand.
Despite the lower production volumes, Aramco has increased its dividends, introducing a performance-linked payout mechanism last year.
Ownership Structure
The Saudi government directly holds just over 82% of Aramco, while the PIF owns 16% – 12% directly and 4% through its subsidiary Sanabil.
The remaining shares are held by public investors. Aramco remains a significant revenue source for the Saudi state, producing about 9 mbpd of crude, which is roughly 75% of its maximum capacity.
Overall, the robust demand for Aramco shares underscores the confidence investors have in the company’s potential and the kingdom’s economic vision.
As Saudi Arabia continues to diversify its economy and attract foreign investment, the success of this share sale will be a critical milestone in its ongoing transformation.
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