Saudi Arabia is set to generate over $11.2 billion by selling shares in its oil behemoth, Aramco, according to an announcement made on Friday.
The shares were priced at 27.25 riyals ($7.27), which is at the lower end of the initial pricing spectrum that ranged from 26.7 to 29.0 riyals.
This sale is part of a broader strategy to fund the kingdom’s expansive spending plans.
Despite setting a modest price, the offering attracted significant interest, being covered four to five times according to sources familiar with the deal.
Interest was particularly strong from international markets, surpassing that of Aramco’s 2019 Initial Public Offering (IPO).
Stakeholders from China, other parts of Asia, and Europe were notably active, signaling robust global demand.
This sale is pivotal for Saudi Arabia as the nation continues to pursue foreign investment to support its ambitious projects aimed at reducing its oil dependency.
However, achieving investment targets has been a consistent challenge.
The funds raised are expected to support the Public Investment Fund (PIF), Saudi Arabia’s $925 billion sovereign wealth fund, which has recently refocused its efforts on fewer, but pivotal, projects to drive the nation’s Vision 2030.
This vision, championed by Crown Prince Mohammed bin Salman, includes a range of initiatives from electric vehicle development to constructing advanced cities in the desert.
The need for liquidity is pressing for the kingdom, particularly as it faces a budget deficit exacerbated by lower oil prices.
Brent crude was trading just below $80 a barrel, marking a continued decline.
According to the IMF, Saudi Arabia requires an oil price of $96.2 a barrel to balance its budget.
Edward Al-Hussainy from Columbia Threadneedle expressed skepticism about the future rise in oil prices: “It is not clear that oil prices will continue to go up the way they have over the last several years,” highlighting the financial vulnerabilities that spurred the share sale.
Furthermore, he noted that the kingdom’s heavy investment projects have left it “very cash poor,” coming from a “position of weakness.”
The sale also comes at a time when the Saudi-led OPEC, along with allies like Russia, has agreed to extend production cuts into 2025, with a plan to gradually lift some cuts starting from October under favorable market conditions.
Aramco’s shares were sold at a nearly 4% discount compared to the previous day’s closing, putting the company’s valuation at about $1.76 trillion.
The sale, known as Project Bond, was meticulously planned over months, following the record-setting 2019 IPO.
Investor response was mixed, with some deterred by Aramco’s high valuation relative to other oil majors, ongoing state control, and concerns over the future of hydrocarbons.
The government is selling approximately 0.64% of Aramco, potentially increasing to 0.7% if the greenshoe option is exercised, which could bring the total raised to approximately $12.36 billion.
The shares are expected to begin trading on Riyadh’s Saudi Exchange come Sunday.