Aramco seeks $12b in share sale to fuel economic diversification
Saudi Aramco, the world’s largest oil producer, kicked off a major share sale on Sunday aiming to raise $12 billion for the Saudi Arabian government, as reported by Bloomberg.
This offering marks a significant test of investor appetite for the kingdom’s assets and comes at a critical juncture for its economic transformation plans, according to the report.
Investors are presented with a unique opportunity with Aramco. While the company offers a high annual dividend payout of $124 billion, one of the highest globally, its share price is higher compared to other energy companies.
There are also long-term risks to consider, such as government control by Saudi Arabia and the uncertain future of oil demand in a world focused on climate change, the report added.
This long-awaited secondary share sale comes as Crown Prince Mohammed bin Salman continues to advance Vision 2030, a plan aimed at diversifying the Saudi economy and reducing its reliance on oil.
Despite these efforts, challenges persist, with oil prices below the government’s break-even point and foreign direct investment falling short of expectations.
Saudi Arabia is selling shares of Aramco to boost its cash reserves and address budget deficits.
The kingdom has been active in international debt sales this year, raising $17 billion. It has also increased domestic riyal note sales compared to last year.
The economic transformation plan has faced delays, with some projects postponed beyond 2030 and ambitious goals for the Neom desert city scaled back.
The Saudi economy has contracted for three consecutive quarters, with a budget deficit for six consecutive quarters. Despite this, the government continues to depend on Aramco’s $31 billion quarterly dividend, a key attraction for foreign investors.
Saudi Arabia is selling 1.545 billion shares of Aramco, representing 0.64 per cent of the company, at a price range of 26.70 to 29 riyals per share.
The offering period ends on Thursday, with final pricing set on Friday. The government, holding an 82 per cent stake in Aramco, could raise an extra $1.2 billion by selling more shares.
