Saudi Arabia has held back oil production but now let’s foreign investors grab the lion’s share…
Saudi Aramco’s recent $11.2 billion stock sale saw a significant shift in investor interest compared to its 2019 initial public offering (IPO). This time, foreign investors were allocated approximately 60% of the shares on offer, a notable increase from the 2019 IPO, which was predominantly a domestic affair.
Now, we turn our attention to news about Saudi Aramco’s $11.2 billion stock sale. The oil giant will likely allocate about 60% of its share sale to foreign funds.@SaroyaHem tells you more
Watch more at https://t.co/AXC5qRuO3J pic.twitter.com/PbRJ0TZ6Gr
— WION (@WIONews) June 9, 2024
The strong demand for Aramco’s shares came from a diverse group of international investors, including those from the United States and Europe. Additionally, funds from the United Kingdom, Hong Kong, and Japan also participated in the sale. In total, the share sale attracted orders worth more than $65 billion.
The 2019 IPO of Aramco had seen overseas investors hesitant due to high valuation expectations, resulting in the government relying heavily on local buyers. The IPO raised $29.4 billion, with orders worth $106 billion, but only 23% of the shares were allocated to foreign investors.
On the first day of trading following the completion of the secondary offering, Aramco shares initially dropped by 1.4% in Riyadh. However, they quickly recovered and closed up by about 1%. The secondary offering attracted around 450 funds, including over 125 new international investors.
Aramco confirmed that a majority of the shares in this offering were allocated to foreign funds. According to a statement released by the company, international institutional investors now hold approximately 0.73% of Aramco.
Aramco 6.6% yield is attractive but foreign investors wouldn’t have invested $6.5b unless they see strong #Oil prices continuing to support that yield.
Nearly 60% of Aramco $11.2b issue was outside of Saudi vs only 23% in IPO.
Thx @MattMartin128 @julia_fioretti #OOTT pic.twitter.com/0xQUmOBZDN
— Dan Tsubouchi (@Energy_Tidbits) June 9, 2024
A key factor drawing investors this time is Aramco’s substantial dividend, which ranks among the largest in the world. Despite a steep valuation and the absence of buybacks, investors are enticed by the annual payout of $124 billion. Bloomberg Intelligence estimates that this will yield a return of 6.6%.
Saudi Arabia managed to secure enough bids to cover all available shares within hours of launching the deal. The offer, which closed on Thursday, is expected to generate at least $11.2 billion in proceeds for the kingdom, excluding over-allotments. This influx of cash is set to support Saudi Arabia’s ambitious plans to diversify and transform its economy through a multitrillion-dollar investment program.
The final pricing for the shares was towards the lower end of the proposed range, set between 26.70 riyals and 29 riyals. Notably, Aramco’s stock had been trading below the top end of this range since the deal was announced, closing at 28.30 riyals on Thursday.
The level of foreign participation in the offering was a focal point, with Aramco’s top executives conducting a series of promotional events in London and the United States to generate interest and demand.
Currently, the Saudi government retains approximately 82% ownership of Aramco, with the Public Investment Fund holding an additional 16% stake. Despite the stock sale, the kingdom remains the primary shareholder of the oil giant.
📈💥 $65B in Bids Show Aramco’s Global Appeal! 🌍💰
– 🚀 60% of #Aramco shares poised for international investors, massive interest from the US & Europe!
– 🌏 Additional strong support from UK, Hong Kong & Japan.
– 💡 Insight: If Saudi mega-projects were listed like… pic.twitter.com/tPVRsiXk4w
— Ehtesham Khan, CMT,CFTe (@ehtesham_a_khan) June 9, 2024
This successful stock sale marks a significant shift in Aramco’s investor base and highlights the growing interest of international investors in the Saudi market. The proceeds from this sale are expected to play a crucial role in supporting Saudi Arabia’s Vision 2030, an ambitious plan aimed at reducing the country’s dependency on oil revenue and diversifying its economy through investments in various sectors.
Major Points:
- High Foreign Investment: Approximately 60% of shares in Saudi Aramco’s $11.2 billion stock sale were allocated to foreign investors, a significant increase from the 2019 IPO.
- Strong Demand: The share sale drew orders worth over $65 billion, with notable interest from investors in the US, Europe, the UK, Hong Kong, and Japan.
- Dividend Attraction: Investors were attracted by Aramco’s substantial annual dividend payout of $124 billion, offering an estimated yield of 6.6%.
- Government Retains Majority Stake: Despite the sale, the Saudi government remains the primary shareholder with around 82% ownership, supplemented by a 16% stake held by the Public Investment Fund.
- Support for Economic Diversification: The proceeds from the stock sale will help fund Saudi Arabia’s Vision 2030, a multitrillion-dollar initiative aimed at diversifying the economy beyond oil revenue.
Al Santana – Reprinted with permission of Whatfinger News
