Saudi Arabia sells $12bn of Aramco shares

Saudi Arabia sells approximately $12bn in shares of its national oil company Saudi Aramco to raise capital for its sovereign fund.

Saudi Arabia will sell between SR26.7 to SR29.50 for at least 1,545bn shares or 0.64 percent of the world’s largest oil company.

Saudi Arabia also has an option to sell up 154,5mn additional shares at the final price. The kingdom would earn an extra $1bn if the option was exercised fully.

Amin Nasser said that the timing of the sale was decided by the government. However, the offering provided an opportunity for Saudi Aramco to expand its international investor base. He refused to identify any anchor investors, but said the offering would start on June 2nd and end on the 6th.

This transaction offers current and new investors the opportunity to build a substantial position in Saudi Aramco, at a price that we believe provides attractive value and growth for our shareholders,” said he. He added that Aramco paid out $98bn of dividends in 2023, and is expected to pay $124bn out this year.

Aramco shares have fallen in value since the beginning of the year, and were at SR29 as of Thursday. Nasser, however, denied that Aramco’s secondary offer was priced below its blockbuster IPO of 2019. He explained that two additional rounds of bonus shares had meant that Aramco shareholders paid SR26.4 for each IPO share.

According to sources familiar with the situation, Crown Prince Mohammed bin Salman took a decision after several days of preparations by Aramco.

This offering is the culmination to a long-term plan of selling more shares in state-owned oil company after its record-breaking listing in 2019. The sale coincides with Opec’s twice-yearly Ministerial Meeting, which will take place on Sunday. This is when the Saudi-led cartel decides on the oil production levels for 2019.

Saudi Aramco has been preparing for an share sale in a stop-start manner for several months. One person said that the government decided to cancel the sale at least twice at the last minute.

Saudi Arabia has been reviewing mega-projects due to concerns over the costs of an ambitious economic diversification program.

The Public Investment Fund is expected to benefit the most from the sale of shares of the country’s main revenue generator, as the government is focused on maintaining robust economic growth outside the oil industry. Nasser stated that the sale will not help Aramco with its capital expenditure plans.

The PIF was the primary recipient of funds raised in the initial IPO of late 2019 and is the principal investment vehicle the crown prince uses to overhaul the Saudi economy.

Saudi Arabia raised $25.6bn in the initial listing by selling 3bn share, which is equivalent to 1.5% of the company. Proceeds went to the PIF. The proceeds from the sale were raised to $29.4bn a month later when it sold 450mn additional shares.

In recent years, the government has increased the PIF’s fund several times. This includes transferring $40bn of foreign reserves from the central banks at the beginning of the Covid-19 epidemic. The government transferred 4% of Saudi Aramco’s shares to the PIF at the beginning of 2023. Another 8% was added in March.

Transfers helped increase the assets managed by PIF and provide it with revenue from Aramco dividends. The company announced on Thursday that its latest share sale will come from government shares, not PIF shares.

PIF managed $925bn of assets at the end 2023. The stated goal is to increase this figure to $1tn of assets by 2025.