Saudi Aramco’s US$12 billion share sale sold out shortly after the deal opened on Sunday (Jun 2), in a boon to the government that’s seeking funds to help pay for a massive economic transformation plan.
The government had demand for all shares on offer in a few hours after books opened, according to terms of the deal seen by Bloomberg News. Books were covered across the price range of 26.70 riyals to 29 riyals.
The shares fell as much as 2.9 per cent to 28.30 riyals on Sunday, valuing Aramco at about US$1.8 trillion. The stock has dropped about 14 per cent this the start of this year, when Bloomberg News first reported the government’s intention to offload a stake, and is currently trading at its lowest levels in over a year.
A top selling point of the offer is the chance to reap one of the oil industry’s biggest dividends. Investors who are willing to look past a steep valuation and the lack of buybacks would cash in on a US$124 billion annual payout that Bloomberg Intelligence estimates will give the company a dividend yield of 6.6 per cent.
Aramco’s record US$29.4 billion IPO had drawn orders worth US$106 billion. For the latest share sale, attention will turn to foreign investors who’d largely balked at valuation expectations during the 2019 listing and left the Saudi government reliant on local buyers.
It’s not yet clear how much of the orders on Sunday came from overseas.
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The Saudi government owns about 82 per cent of Aramco, while the kingdom’s wealth fund holds a further 16 per cent stake. The kingdom will continue to be the main shareholder after the offering, which has been in the works for years.
Crown Prince Mohammed bin Salman said in 2021 that the government would look to sell more Aramco shares in the future. Those plans gained momentum a year ago, when the kingdom began working with advisers to study the feasibility of a follow-on offer.
The deal ranks among the largest share sales globally since Aramco’s listing. Proceeds will help fund initiatives to diversify the economy as the kingdom pushes into artificial intelligence, sports, tourism and projects such as Neom.
The offer adds to Saudi Arabia’s efforts to raise cash to fill a budget deficit. International debt sales this year have brought in US$17 billion, more than any other emerging-market sovereign, according to data compiled by Bloomberg. The government has also sold US$25.5 billion of riyal notes domestically, up from just under US$20 billion during the same period a year ago.
The government kicked off the deal hours ahead of an Opec+ gathering to discuss oil output policy. The group has the outline of a deal to extend supply curbs to the end of the year, according to delegates, which would keep Saudi Arabia’s production near the lowest level in about three years.
The deal coincides with a period of strong demand for new share sales in Saudi Arabia. In recent weeks, four firms drew a combined US$176 billion in orders for their initial public offerings as fund managers flocked to deals that have offered near-guaranteed returns over the last two years.
In all, Saudi Arabia plans to sell 1.545 billion shares, representing a 0.64 per cent stake. The government could raise an additional US$1.2 billion if it exercises an option to sell more shares as part of the offering. BLOOMBERG
