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.

The post Saudi Arabia Plans Aramco Share Sale of $11.5B for Diversification appeared first on Industry Leaders Magazine.

Saudi Arabian Energy Minister Khalid Al Falih said on Thursday that Saudi Aramco IPO – currently slated for a debut in the second half of 2018 – could be delayed until 2018.

Speaking in Vienna, Al Falih said Tadawul bourse (Saudi Stock Exchange) would be Aramco’s primary listing, with an international secondary listing to be determined by where the market for its products is, which is “shifting to the east.”

A successful Saudi Aramco IPO will be a sign of the Saudi Arabian Oil Company’s privatization. Although, there has been concern about whether Tadawul bourse will be able to handle the IPO of the largest oil company in the world. As of now, petrochemical stocks represent a quarter of the share of the oil and petrochemicals industry would become large on the exchange.

One viable solution is to create more difficulties. If Saudi Aramco’s influence on the Tadawul index is artificially limited in order to put a leash on the presence of industry stocks to a more agreeable level. Investors interested in buying a more diverse portfolio might think twice before doing it.

Saudi Arabia is planning to sell shares on the local market as well as international. The overseas selling might prove to be difficult for various reasons. To start with, Prince Mohammed has said publicly Aramco would be valued at more than $2 trillion. A figure not everyone thinks is realistic outside the kingdom. Secondly, Saudi officials are still struggling to reconcile with their hope for becoming the biggest pull of funds with less stringent regulations. All arrows point towards Hong Kong, and not New York or London, which would be very disappointing.

The planned sale of 5 percent of Aramco would likely be the largest IPO in history. It could bring Saudi Arabia more than $100 billion if the valuation of the oil company stands at $2 trillion. Analysts are estimating a much less value at between $1 trillion and $1.5 trillion.

For more than two years, Saudi offices have said the Saudi Aramco IPO was “on track” for the second half of 2018. In March they announced it would be delayed into 2019. Last month, Al-Falih said the sale would happen next year.

The post Saudi Aramco IPO delayed until 2019 appeared first on Industry Leaders Magazine.