Saudi Arabia has successfully sold $11.2bn worth of shares in Saudi Aramco, falling short of the maximum amount that could have been raised. The world’s largest oil company embarked on a week-long roadshow led by chief executive Amin Nasser, with stops in London and New York, culminating in the placement of 1.55bn shares at SR27.25 ($7.27) apiece. Despite receiving over $60bn in orders for the shares, 60% of the allocation went to investors outside Saudi Arabia, with over 120 new investors from the US, UK, Hong Kong, and Japan buying into Aramco.
The company set a price range of SR26.7 to SR29 for the shares, ultimately placing them at a 6% discount to the closing price of SR29 on the day before the deal was announced. This sale raises new funds for the government, supporting Vision 2030, Crown Prince Mohammed bin Salman’s plan to transform Saudi Arabia’s economy. The objective of the offering was to broaden the international investor base, with the company highlighting its improved dividend yield from its 2019 offering, promising to pay out $124bn this year.
Saudi Aramco targeted investors in Asia, adding two Chinese banks to the list of institutions working on the offering and garnering strong interest from Chinese energy companies. There was also anticipated demand from sovereign wealth funds in Asia seeking alternatives to US Treasuries. However, the investment case for Saudi Aramco is contingent on the outlook for the oil price amid debates over future demand, with differing views on the potential for a surge in the oil price and concerns regarding growth and government control.
Despite facing hurdles with the perception of Saudi Arabia as an emerging markets play and the potential oversupply of oil, Saudi Aramco’s offering was met with positive reception in New York, with banks reporting that the reception exceeded expectations. While the company may have struggled to meet heads of large institutional investors, valuable meetings were held with other significant players, ultimately achieving the goal of broadening the investor base and increasing liquidity. The success of the offering marks a key milestone in Saudi Aramco’s efforts to attract international investors and raise funds for the government’s economic transformation initiatives.
Discussion about this post