Foreign investors are set to receive approximately 60% of the shares on offer in Saudi Aramco’s recent $11.2 billion stock sale.
This marks a major shift from the oil giant’s 2019 initial public offering (IPO), which saw limited foreign participation and was largely supported by local investors.
The deal has generated robust interest from the United States and Europe, according to people familiar with the matter, Bloomberg first reported, adding that funds from the UK, Hong Kong, and Japan also played a role.
In total, the share sale attracted orders exceeding $65 billion, showcasing a strong demand for Aramco’s stock on the global stage.
In contrast, the 2019 IPO faced skepticism from international investors and overvaluation concerns, resulting in the Saudi government relying heavily on local buyers. The $29.4 billion IPO at that time garnered orders worth $106 billion, with only 23% of the shares allocated to foreign investors.
Although Aramco representatives have not put out any statement in this regard yet, one of the key attractions for investors in the latest offering is Aramco’s substantial dividend, which ranks among the world’s largest.
What to know
Despite a high valuation and absence of buybacks, investors are enticed by the $124 billion annual payout, which Bloomberg Intelligence estimates will yield a 6.6% return.
The share sale witnessed a rapid uptake, with Saudi Arabia securing enough bids to cover all the shares within hours of launching the deal.
The offering closed on Thursday, with the kingdom set to raise at least $11.2 billion, excluding potential over-allotments.
This influx of capital is crucial for Saudi Arabia’s ambitious plans to diversify its economy through multitrillion-dollar investments.
The final pricing of the shares was at the lower end of the proposed range, settling between 26.70 riyals and 29 riyals.
Notably, Aramco’s stock has been trading below the upper limit since the announcement of the deal, closing at 28.30 riyals on Thursday.
Aramco is currently worth 6.85 trillion($1.82 billion) riyals as of June 2024 a considerable drop from the $2.11 trillion, which is 7.92 trillion Saudi riyals recorded around May last year.
What we know
The level of foreign participation in this sale was a focal point, prompting Aramco’s top executives to conduct a series of events in London and the US to attract international investors.
- The increased interest from foreign funds indicates a growing confidence in Aramco’s financial prospects and the broader Saudi economy.
- Currently, the Saudi government holds approximately 82% of Aramco, with the Public Investment Fund owning an additional 16% stake. Even after the stock sale, the kingdom will remain the primary shareholder.
- This foreign investment comes as part of Saudi Arabia’s broader Vision 2030 initiative, aimed at reducing the country’s dependence on oil revenues by investing in various sectors such as tourism, technology, and renewable energy.
- The heightened international interest in Aramco’s stock reflects a more favorable view of the company’s financial stability and potential for growth, despite the challenges faced by the global energy market.
