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Home » Economy » Saudi Aramco Concludes $11.2 Billion Share Sale with Over 50% Shares Allocated to Foreign Investors
Saudi Aramco Concludes $11.2 Billion Share Sale with Over 50% Shares Allocated to Foreign Investors
Saudi Aramco Concludes $112 Billion Share Sale with Over 50_ Shares Allocated to Foreign Investors

Saudi Aramco has raised a staggering $11.2 billion after its secondary share sale.

The share offering was the largest in the Middle East since its inaugural offering in 2019, with 58% of shares being allocated to international investors. 

The sale supports Saudi Arabia’s Vision 2030 economic goals to diversify the economy.

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Broadening the Investor Base

The share sale, which saw the issuance of 1.545 billion shares or approximately 0.64% of Aramco’s total outstanding shares, has strategically broadened the company’s shareholder base. 

Notably, international investors seized the opportunity, securing a substantial 58% stake in the offering, a significant leap from the 23% foreign participation witnessed during the 2019 IPO.

Amin Nasser, Aramco’s Chief Executive Officer, hailed the transaction as a resounding success, stating,

“This landmark deal achieves our objectives of diversifying and expanding our shareholder base, attracting robust participation from new international and domestic investors, thereby bolstering the liquidity of our shares.”

Attracting Global Interest

The offering has garnered substantial interest from investors across the globe, with a substantial portion of orders originating from the European Union and the United States. 

Investors from Japan, Hong Kong, and Australia also seized the opportunity, underscoring the unwavering confidence in Saudi Aramco’s long-term prospects.

Dividend: Key Selling Point

Image Credit Aramco

One of the key selling points for international investors was Aramco’s substantial annual dividend payout of $124 billion, the largest in the world. 

While the company’s stock may be trading at a premium compared to its Western counterparts, the allure of consistent and substantial dividend payments has proven to be a compelling proposition for investors seeking stable returns.

Aramco’s Pricing Strategy 

In a strategic move, Aramco priced the offering at 27.25 Saudi riyals ($7.27) per share, positioning it at the lower end of the previously announced range of 26.70 to 29 Saudi riyals. 

This careful pricing strategy resonated with investors, as Aramco’s shares opened at 27.95 riyals on the Saudi stock exchange on Sunday, subsequently climbing to 28.35 riyals later in the trading session.

Aramco’s Stabilizing Mechanism 

Image Credit JOHN NACION

Notably, the underwriters of the share sale, including Merrill Lynch Kingdom of Saudi Arabia, have been granted an over-allotment option, commonly referred to as a “greenshoe” option. 

This provision allows them to sell additional shares until July 9, potentially increasing the total proceeds to $12.35 billion, further solidifying Aramco’s financial position.

As the dust settles on this monumental transaction, industry analysts and investors alike will closely monitor Aramco’s performance and the broader implications of this share sale on Saudi Arabia’s economic transformation journey.

Orchestrating the Deal

Image Credit Goldman Sachs

The secondary share offering was orchestrated by a consortium of renowned investment banking titans, underscoring the global significance of the transaction. SNB Capital assumed the role of lead manager. 

At the same time, Citigroup Inc., Goldman Sachs Group Inc., HSBC Holdings Plc, JPMorgan Chase & Co., Bank of America Corp., and Morgan Stanley served as joint global coordinators.

Additionally, M. Klein & Co. and Moelis & Co. provided their expertise as independent financial advisers, ensuring a seamless execution of the offering.

Fueling Economic Transformation

Image Credit NEOM

The proceeds from this mammoth share sale are poised to provide much-needed financial momentum to Saudi Arabia’s ambitious economic reform agenda, encapsulated in the Vision 2030 blueprint. 

This strategic initiative, spearheaded by Crown Prince Mohammed bin Salman, aims to diversify the Kingdom’s revenue streams and reduce its heavy reliance on oil exports.

Image Credit Killa Design

Integral to this vision are the so-called “gigaprojects,” such as NEOM and the Red Sea, futuristic projects for the hub of innovation and sustainable living. By channeling funds into these transformative endeavors, Saudi Arabia is paving the way for a more resilient and diversified economic landscape.

Boosting Financial Reserves

Image Credit Andre MChang

With the Saudi government retaining an 81.5% stake in Aramco following the secondary share sale, the proceeds from this offering are expected to boost the Kingdom’s financial reserves. 

This influx of capital is particularly crucial as Saudi Arabia grapples with the economic repercussions of the COVID-19 pandemic and fluctuating oil prices.

ESG Considerations

Image Credit Getty Images

In an era where environmental, social, and governance (ESG) factors increasingly influence investment decisions, Aramco’s commitment to sustainable practices and responsible operations will be closely scrutinized. 

The company’s ability to balance its role as a leading energy provider with its environmental stewardship will be pivotal in shaping its long-term sustainability and attracting socially conscious investors.

A Pivotal Milestone

Saudi Aramco’s $11.2 billion secondary share sale represents a pivotal milestone in the Kingdom’s economic transformation journey. 

As the world’s largest oil exporter navigates the evolving energy landscape, this landmark transaction serves as a resounding vote of confidence in Aramco’s future and the Kingdom’s ambitious vision for a more sustainable and diversified economic future.

More Aramco Ventures 

Saudi Aramco Stake in GO Ltd.

Image Credit Gas Oil Pakistan Ltd GO

Aramco’s 40% acquisition share in Gas & Oil Pakistan Ltd. has been approved by Pakistan’s Competition Commission (CCP). 

This decision marks Aramco’s initial venture into Pakistan’s fuel retail market to expand its international presence and acquire additional distribution channels for its refined petroleum products. 

This investment adds to the previous $21 billion investments, including Saudi Arabia’s recent $5 billion investment package for Pakistan, demonstrating a continued commitment to strengthening bilateral relations and supporting Pakistan’s economy.

ARAMCO Global Partnership with FIFA 

A 4-year global partnership has been announced by Saudi Aramco and FIFA, with Aramco now being FIFA’s exclusive worldwide partner in the energy category. 

As part of the sponsorship agreement, Aramco will have the rights to the highly anticipated FIFA 2026 World Cup and FIFA Women’s World Cup 2027. Aramco’s goal is to support the growth of sports on a global scale, which is in line with FIFA’s mission to host major tournaments and promote grassroots programs.

Title Sponsor of Aston Martin F1

Image Credit Aston Martin

The Aston Martin Formula One Team, headquartered in Silverstone, England, has extended its partnership with Saudi Aramco, who will continue to be its Sole Title Sponsor until 2028. 

Effective January 1, 2024, the team will be referred to as the Aston Martin Aramco Formula One Team. This renewed collaboration signifies a commitment to developing innovative mobility solutions on and off the racetrack.

Aramco and Enowa Partnership

Image Credit NEOM

Saudi Aramco and Enowa, the energy and water company of NEOM, have agreed to build a synthetic e-fuel plant in NEOM. 

This plant aims to produce 12 tonnes of synthetic methanol daily using green hydrogen and captured CO2, strongly emphasizing promoting the circular carbon economy and reducing CO2 emissions. 

The e-fuel facility will showcase a synthetic gasoline value chain’s technical feasibility and commercial viability. This project is prominent in Aramco’s wider endeavors to research, develop, and demonstrate low-carbon synthetic fuels.

Keep Reading: Saudi Aramco Acquires 40% Stake in Pakistan Gas & Oil Pakistan Ltd (GO) after CCP Approval

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