Saudi Arabia and its financial partners will begin soliciting orders for up to $13.1 billion in shares of its oil giant, Aramco, starting Sunday. This significant move is a vital test of global investor interest in the Saudi market.
On Thursday, Saudi officials decided to sell up to 0.7% of Aramco, reserving 10% of the shares for retail investors. The order-taking period will continue until June 6, with pricing scheduled for June 7. Dubbed Project Bond, this offering aims to attract diverse investors and is part of Saudi Arabia’s extensive economic diversification plan.
Despite the anticipation, the initial response from international investors has been tepid. This is largely due to concerns about overvaluation and the Saudi government’s substantial control over Aramco, coupled with global shifts away from fossil fuels.
The offering tests market sentiment after a lukewarm reception to Aramco’s 2019 IPO, which set a record but also highlighted environmental and governance concerns. Hasnain Malik, head of equity research at Dubai’s Tellimer, noted that while dividend expectations and oil prices have risen, these factors may not suffice to attract foreign investors who skipped the IPO due to environmental and governance worries.
Aramco’s CFO, Ziad Al-Murshed, remained tight-lipped about any major commitments from anchor investors. The shares are priced between 26.7 riyals ($7.12) and 29 riyals, with the company’s value pegged at $1.87 trillion, up from $1.7 trillion at its IPO.
This sale is part of a global trend in stock offerings, which have reached $247.4 billion this year, marking the most active period since 2021 and among the largest of the past decade.
Saudi Arabia, led by Crown Prince Mohammed bin Salman, is redirecting funds from the Public Investment Fund (PIF) into massive development projects and new industries to reduce the kingdom’s dependence on oil. Jim Krane of Rice University’s Baker Institute in Houston views the Aramco share sale as a strategic move to support these initiatives, especially as foreign investment in other Saudi mega-projects has been insufficient.
Krane suggests that the share sale primarily attracts domestic investors and indirectly funds Saudi Arabia’s ambitious Vision 2030 projects.
Advisory firms like Klein & Co and Moelis & Co provide independent advice, while SNB Capital leads sales management and global coordinators like Morgan Stanley, Citi, and others.
Aramco’s CEO, Amin Nasser, emphasized that the sale would allow new and existing investors to strengthen their positions in Aramco, enhancing the company’s shareholder base and share liquidity.
This share offering coincides with an OPEC+ meeting, where extended production cuts are under discussion, possibly influencing global oil prices.
