Secondary public offering nets USD 11.2 bn / Foreign investors courted / Sabic integration adds mass
By Dede Williams

In its second stock launch in five years, Saudi Aramco (Dhahran; has placed fresh shares worth USD 11.2 bn (EUR 10.4 bn) on the Tadawul exchange. The intake was somewhat short of the oil and petrochemicals giant’s USD 12 bn goal, but the offering was subscribed quickly and, according to reports, several times over.

The latest public offering saw nearly 1.55 bn shares of the oil and chemical giant change hands (Photo: Aramco)

This was despite fears that the new issue might not go ahead, mirroring the uncertainty about the first listing seen five years ago.

Pitched strongly to international investors, the transaction that ended on 6 June 2024 saw nearly 1.55 bn shares, or 0.64 % of the company’s equity, change hands at an average price of SAR 27.25 (EUR 6.72). Aramco’s tally shows institutions receiving 90% of the shares, retail investors the remainder.
Strong interest among foreign investors?
Sources quoted by the Bloomberg news agency said that interest from foreign investors was high, unlike in Aramco’s 2019 placement, when Saudi investors accounted for a solid majority of buyers. 

The current transaction carried additional weight, due to the company’s consolidation of chemicals and plastics producer Sabic (Riyadh, Saudi Arabia; since mid-2020.

Along with US and UK investors, the stock this time was also pitched strongly to Asia. Two regional financial institutions, Bank of China International and China International Capital Corporation, were listed as working on the transaction. Commentators told news agencies that Chinese energy companies were likely to have shown interest.

Related: Aramco deepens footprint in China

While some reports in circulation said the Aramco shares had been offered at a 6% discount to the closing price of SAR 29 on the day before the plans were announced, CEO Amin Nasser said the calculation was distorted by two rounds of bonus shares.

Following the secondary offering, about half the size of the 2019 blockbuster IPO that yielded USD 25.6 bn, the Saudi government now owns about 82% of Aramco, with the Kingdom’s USD 925 mn sovereign wealth fund, Saudi Public Investment Fund (PIF), holding about 16%. 
Vision 2030 said to be a drain on finances
The 2024 launch was generally regarded as a fundraising effort for the Riyadh government, which reported a budget deficit of USD 3.3 bn for the year’s first quarter. The PIF was the main recipient of funds from the listing five years ago, but it is as yet unclear how the revenue will be divided this time.

Many observers said they believe that the demands of Vision 2030, Crown Prince Mohammed bin Salman’s plan to transition Saudi Arabia’s economy away from oil, have been a drain on the country’s finances.

British daily newspaper Financial Times said the share was a “hard sale” to some international investors, as it meant increasing their exposure to oil at a time when future demand is hard to gauge, and the industry faces environmental and governance concerns.

Also in the negative column, analysts told the paper that there were also concerns over market growth and the Saudi government’s control of the company.

Related: Oil giant Aramco ousts Apple as world’s largest company

To make a stock purchase look more attractive, Aramco touted its improved dividend yield after the 2019 offering, which analysts said is now in the realm of 6.5-7%, compared with around 4% prior to the IPO, and one of the highest among its peers. Backed by the government, the company has promised to pay out USD 124 bn to shareholders this year. 
11.06.2024 [255532-0]
Published on 11.06.2024

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