Saudi Arabia is preparing to raise over $11.2 billion through a secondary offering of shares in its state-owned oil giant, Saudi Aramco. The shares have been priced at 27.25 riyals ($7.27), which is at the lower end of the previously set price range of 26.7 to 29 riyals. According to sources familiar with the matter, the book for the offering was oversubscribed by four to five times, indicating strong interest despite the pricing.
While Aramco has not provided official comments regarding the offering, the Saudi government’s communications office has not responded to requests for further details. The substantial interest in the share sale highlights ongoing efforts by the Saudi government to attract foreign investment, a critical aspect of Crown Prince Mohammed bin Salman’s ambitious Vision 2030 plan aimed at diversifying the economy away from oil dependence.
The secondary offering represents a significant test for the Kingdom’s ability to draw overseas capital, which has repeatedly fallen short of targets in recent years. As part of Vision 2030, Saudi Arabia has invested tens of billions of dollars into various sectors, ranging from electric vehicles to futuristic desert cities, primarily through the Public Investment Fund (PIF).
Sources indicate that the proceeds from the share sale will likely benefit the PIF, which plays a pivotal role in the Kingdom’s economic diversification efforts. However, some analysts suggest that these funds may also be used to address the anticipated budget deficit that the Kingdom may face this year.
The pricing of the shares reflects a nearly 4% discount from Aramco’s closing price of 28.41 riyals on Thursday, leading to a valuation of approximately $1.76 trillion for the company. This valuation is slightly below Aramco’s market capitalization based on Thursday’s share price, which was about $1.83 trillion.
The secondary offering follows Aramco’s initial public offering (IPO) in December 2019, which raised a record $29.4 billion, making it one of the largest IPOs in history. The Kingdom’s strategy to divest a portion of its stake in Aramco is part of a broader plan to enhance economic resilience and create a more diversified investment landscape.
Despite the current market dynamics, including fluctuations in oil prices and geopolitical tensions, the interest in Aramco shares underscores the company’s dominant position in the global oil market and the significant role it plays in the Saudi economy. Analysts believe that the company’s financial health and profitability are likely to attract investors looking for stable returns, particularly amid an uncertain global economic environment.
More Read
As the share offering unfolds, the eyes of international investors will be closely monitoring the demand for Aramco shares, as well as the broader implications for Saudi Arabia’s economic reforms. The Kingdom has set ambitious goals for its economic transformation, aiming to reduce reliance on oil revenue and foster sustainable growth through diversification.
In addition to attracting foreign investment, the success of this secondary offering could also bolster the credibility of Saudi Arabia’s financial markets, positioning the Kingdom as an attractive destination for international capital.
Overall, this share sale is seen as a pivotal moment for Saudi Arabia as it strives to navigate the complexities of a post-oil economy. As the Kingdom continues to implement reforms and seek new avenues for growth, the outcome of the Aramco secondary offering will play a crucial role in shaping its economic future. Investors and analysts alike will be watching closely to assess how this move aligns with the long-term objectives outlined in Vision 2030 and its potential impact on the global energy landscape.
