Saudi Aramco’s massive stock offering will raise at least $11.2 billion for Riyadh, representing the largest global stock sale in nearly 3 years, Bloomberg said.
This financial step aims to strengthen Saudi Arabia’s ambitious plans to transform its economy in accordance with its Vision 2030, including sectors such as artificial intelligence, tourism, and the future desert project NEOM, according to the agency.
It was reported from informed sources that the offering was covered between 4 and 5 times, and that demand from abroad was stronger than expected, as the offering witnessed demand from China and other regions in Asia, and from Europe as well.
Saudi Arabia wants to sell approximately 0.64% of Aramco shares, and the offering may reach 0.7% of the company’s shares in what is called the option to sell more shares, which allows bankers to use the shares to stabilize the offering price. If this option is activated, Aramco will raise approximately $12.36 billion.
Bloomberg said the sale included approximately 1.55 billion shares at a price of 27.25 riyals ($7.27) per share, which represents a 6% discount from the last closing price of the stock, in line with the average discount for offers of similar size over the past decade, it said. agency.
An international investor in one of Aramco’s promotions pointed to the oil giant’s dividend yield as a major attraction.
Aramco’s dividend, one of the largest in the world, provides a yield of 6.6% based on Bloomberg Intelligence estimates.
Budget deficit
Bloomberg says that Saudi Arabia’s budget recorded a deficit over 6 quarters, and it has collected more than $40 billion from local and international markets this year to fill the gap.
The sale comes at a time when oil prices fell below $80 per barrel for the first time since last February, which is far below the $96.2 level that Saudi Arabia needs to balance its budget, according to the International Monetary Fund.
Analysts and sources told Reuters that proceeds from the offering will likely be pumped into the Public Investment Fund, although some have indicated that the money may also partially cover the potential deficit in the Kingdom’s budget this year in light of the decline in oil prices.
“It is not clear whether oil prices will continue to rise in the same way they have over the past years,” Edward El-Husseini, head of emerging markets fixed income research at Columbia Threadneedle, told Reuters of the reason for the selling.
The OPEC Plus alliance, which includes the Organization of the Petroleum Exporting Countries (OPEC) and others including Russia, recently agreed to extend most of the production cuts adopted by the alliance until the end of 2025, but it developed a detailed plan for 8 members to cancel some voluntary cuts over a year, starting from Next October if market conditions are favourable.
Al-Husseini said that the Saudi government “needs this liquidity, as it has a severe shortage of liquidity due to huge investment projects to achieve Vision 2030,” adding, “They approached this from a position of weakness.”
Shares will begin trading next Sunday on the Saudi Stock Exchange in Riyadh.
