Saudi Arabia may announce a landmark secondary share sale in oil giant Aramco later on Thursday. The Aramco share sale is pending final approval from Crown Prince Mohammed bin Salman, people with knowledge of the matter said.
Saudi Arabia’s state-controlled Aramco said it would sell some $11.5 billion worth of additional stock in an offering that begins Sunday. This is as Riyadh tackles pressure to raise funds for an array of wide-ranging projects aimed at diversifying its fossil fuel-based economy.
Aramco share sale
The share offering on Riyadh’s Saudi Exchange, which the sources said is expected to be launched on Sunday, is the culmination of a years-long effort to sell another chunk in Aramco one of the world’s most valuable companies after its record-setting IPO in 2019 raised $29.4 billion.
As per sources, the Aramco stock offering could happen as soon as June, with one adding it could raise around $10 billion.
Aramco will offer 1.545 billion shares in a price range between 26.70 and 29 Saudi riyals per share, according to a company filing. At the midpoint of that range, the sale would total nearly $11.5 billion.
The sale represents a follow-on offering, after Aramco initially entered the public markets in 2019 and raised $29.4 billion in the world’s largest ever initial public offering.
Banks including Citi, Goldman Sachs, and HSBC are managing the sale.
Aramco a cash cow
Since the IPO, Aramco has continued to be a cash cow for the Saudi government as it finances a mammoth economic drive to end its “oil addiction”, as the crown prince once called it.
As per Hasan Alhasan, senior fellow at the International Institute for Strategic Studies, the current deal will allow the kingdom to finance large domestic projects tied to that agenda.
Having missed its target for foreign direct investment and with a budget deficit of up to $21 billion in sight, “the kingdom is resorting to the sale of equity in Aramco and to debt issuances”, he said.
“The kingdom is likely to continue redirecting capital to other sectors including renewable energy, technology, tourism, logistics and manufacturing, which Riyadh hopes will constitute sources of long-term economic growth,” he added.
Aramco dividend
The company lifted dividends to almost $98 billion in 2023 from the $75 billion it had been paying annually, despite profit having dropped by nearly a quarter. It expects an outlay of $124.3 billion this year.
Aramco’s investments
Aramco has also invested in refineries and petrochemical projects in China and elsewhere, expanded its retail and trading businesses, and sharpened its focus on gas, making its first foray into liquefied natural gas abroad last year.
Saudi Arabia owns more than 82% of Aramco prior to the sale, the Wall Street Journal has reported.
Aramco shares
Aramco shares closed 0.17% lower on Thursday at a price of 29.1 riyals ($7.76) to give it a market capitalization of about $1.87 trillion. Aramco IPO price valued it at $1.7 trillion, but shares traded 10% higher on their debut, roughly in line with its current valuation.
