The $12 billion share offering by Saudi Aramco was fully subscribed quickly after it opened on Sunday, which is good news for the government, which is looking to raise money to support a significant economic transformation plan.
Within hours of the books opening, the government received orders for every share available, as per the terms of the agreement obtained by Bloomberg News. Books were priced between 26.70 and 29 riyals, however it wasn’t immediately apparent how much of the demand came from outside buyers.
Aramco’s market value decreased by 2.9% to 28.30 riyals on Sunday, putting it at roughly $1.8 trillion. Since Bloomberg News first revealed the government’s plan to sell a stake at the beginning of the year, the stock has fallen by roughly 14%, and it is currently trading at its lowest points in more than a year.
Orders totaling $106 billion were received for Aramco’s historic $29.4 billion IPO. The focus of the most recent share sale will be on foreign investors, who had mainly objected to the 2019 listing’s valuation expectations and left the Saudi government dependent on domestic purchasers.
The opportunity to profit from one of the largest payouts in the oil business is one of the offer’s main selling points. Investors who can get past the company’s high valuation and lack of buybacks stand to gain from an estimated $124 billion yearly payout, which according to Bloomberg Intelligence will give the business a 6.6% dividend yield.
About 82% of Aramco is owned by the Saudi government, and the wealth fund of the country owns the other 16%. Following the years-long preparation for the offering, the kingdom will remain the largest shareholder.
The opportunity to profit from one of the largest payouts in the oil business is one of the offer’s main selling points. Investors who can get past the company’s high valuation and lack of buybacks stand to gain from an estimated $124 billion yearly payout, which according to Bloomberg Intelligence will give the business a 6.6% dividend yield.
About 82% of Aramco is owned by the Saudi government, and the wealth fund of the country owns the other 16%. Following the years-long preparation for the offering, the kingdom will remain the largest shareholder.
In 2021, Crown Prince Mohammed bin Salman declared that more Aramco shares would likely be sold by the government in the future. When the kingdom started collaborating with advisors to assess the viability of a follow-on offer, those plans acquired impetus.
Since Aramco’s debut, this transaction is among the biggest share sales made worldwide. The money raised will support the kingdom’s efforts to diversify its economy as it ventures into new industries including sports, tourism, artificial intelligence, and projects like Neom.
The agreement was initiated by the government just hours before an OPEC+ meeting to talk about oil output policies. Delegates said the group had the outlines of an agreement to extend supply cuts until the end of the year, which would maintain Saudi Arabia’s production close to its lowest point in almost three years.
The agreement is made during a time when Saudi Arabia is experiencing high demand for fresh share sales. Four companies received orders totaling $176 billion in the last several weeks for their IPOs, attracted by fund managers who snapped at offers of nearly assured profits over the previous two years.
Regarding the sale, the government is collaborating with several banks. In addition to Moelis & Co., M. Klein & Co. acts as an independent financial adviser.
The principal manager is SNB Capital. Together with Citigroup Inc., Goldman Sachs Group Inc., HSBC Holdings Plc, JPMorgan Chase & Co., Bank of America Corp., and Morgan Stanley, it also serves as a joint worldwide coordinator. Bookrunners on the transaction include Al Rajhi Capital, BOC International, BNP Paribas SA, China International Capital Corp., EFG Hermes, Riyad Capital, Saudi Fransi Capital, and UBS.