Saudi Aramco has begun selling shares to raise about $12 billion for the Kingdom, one of the largest deals in recent years that tests investor interest in the country’s assets, according to Bloomberg Economic Agency.
Reuters reported that one of the bookrunners in the company’s secondary offering on the Saudi stock market began receiving orders, with an offered price in the range of 26.70 ($7.12) to 29 riyals ($7.73) per share.
The Kingdom, which will continue to own a large majority of the company, could raise an additional $1.2 billion if it exercises the option to sell more shares as part of the offering.
Attract international shareholders
Saudi Arabia is looking to attract more international shareholders after local shareholders largely controlled Aramco’s massive initial public offering five years ago, according to Bloomberg.
Investors will need to balance an annual dividend of $124 billion, one of the largest in the world, against stocks that are much more expensive than other major energy companies, and government control and expectations of oil demand in the face of climate change pose long-term risks, according to Bloomberg. .
The secondary offering of shares – which took years to prepare – comes at a critical time when Saudi Arabia is moving forward with a multi-trillion-dollar plan to reform the economy and reduce its dependence on oil.
But there have been challenges with oil prices falling below the level the government needs to balance spending and foreign direct investment, which is lagging expectations, according to Bloomberg.
Aramco shares fell by as much as 2.24% to 28.35 riyals ($7.56) on Sunday morning in Riyadh, which is their lowest level in more than a year. The government is selling 1.545 billion shares, and the final price of the share will be determined in the offering next Friday.
Budget deficit
Aramco’s offer adds to Saudi Arabia’s efforts to raise more funds to fill the budget deficit, and revenues from international debt sales this year amounted to $17 billion, that is, more than the revenues from sovereign debt of any country among emerging markets, according to data compiled by Bloomberg.
The government also sold domestic debt securities worth $25.5 billion, up from $20 billion during the same period last year.
Saudi Arabia has delayed some projects that are part of its economic transformation plan after 2030 and reduced its ambitions for the ambitious NEOM project, according to Bloomberg.
The economy contracted for 3 consecutive quarters, while the budget remained in deficit for 6 consecutive quarters.
Saudi Arabia relied heavily on Aramco’s dividends, a quarterly dividend worth $31 billion that the company maintained despite the decline in oil production.
Aramco CEO Amin Nasser said in a conference call last Thursday, “The offering provides us with an opportunity to expand the shareholder base among Saudi and international investors, and our commitment to shareholder returns speaks for itself.”
Aramco in numbers
- Number of shares issued: 242 billion shares.
- Establishment date: November 13, 1988.
- Production capacity: 12 million barrels per day.
- Share value: 28.30 riyals ($7.54) as of writing.
- Company value: $1.82 trillion.
- 2023 revenues: $440.9 billion.
- 2022 revenue: $535.2 billion.
- 2023 profits: $121.27 billion.
- 2022 profits: $161 billion.
- 2023 distributions: 366.7 billion riyals ($97.8 billion).
- The Saudi government’s share of the company: 82%.
- The Public Investment Fund’s share is 16%.
