June 22, 2024
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Saudi Arabia to Launch $13.1 Billion Aramco Share Sale, Testing International Investor Interest

Saudi Arabia and its bankers will start taking orders on Sunday morning for up to $13.1 billion worth of shares in its energy giant Aramco. This move marks a significant test of international investor interest in the Saudi market.

In a long-anticipated announcement on Thursday, the kingdom and Aramco detailed plans to sell up to 0.7% of the state-controlled oil company, with 10% of the offering reserved for retail investors. Order-taking will run through June 6, with the deal set to price on June 7.

According to Reuters, this offering aims to diversify the company’s investor base since its record-breaking initial public offering (IPO) in 2019. It is also expected to support the kingdom’s extensive economic diversification program.

This share sale tests investor interest in Saudi markets, which saw lukewarm international participation in the 2019 flotation due to concerns about high valuation, government control, and the energy transition away from hydrocarbons. International investors have also been cautious about the kingdom’s mega-projects, from beach resorts to new cities.

Investors in Aramco will need to balance environmental concerns with the company’s rich payouts.

“Since the IPO, higher expectations on dividend payout and oil price have outweighed lower expectations on output,” said Hasnain Malik, head of equity research at Dubai-based Tellimer.

However, he noted that this cash flow improvement might not attract foreign investors concerned about fossil fuels or governance issues.

Aramco Chief Financial Officer Ziad Al-Murshed was cautious about anchor investors’ interest in taking a significant portion of the offering.

He noted that shares are on sale above the IPO price, within a range of 26.7 riyals ($7.12) to 29 riyals, after closing at 29.1 riyals on Thursday. This values the company at $1.87 trillion, up from the IPO valuation of $1.7 trillion.

This share sale comes as global stock offerings have reached $247.4 billion year-to-date, the highest level since 2021, according to Dealogic data. It is set to be one of the biggest share sales in the past decade.

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