Saudi Arabia’s oil giant sees massive share offering sell out in hours as investors call for annual dividend of $124 billion
Saudi Aramco’s $12 billion share sale was sold off shortly after the deal began on Sunday, benefiting the government seeking capital to help pay for its economic transformation plan large scale.
The government had demand for all the shares on offer within hours of the books opening, according to terms of the deal reviewed by Bloomberg News. Books are priced between 26.70 riyals and 29 riyals.
While it was not immediately clear how much demand was coming from abroad, the order book reflected a mix of domestic and foreign investors, three people familiar with the matter said, declining to be identified because of information. This information is private.
The level of foreign participation will be closely watched as an indicator of interest in Saudi assets. In Aramco’s 2019 initial public offering, foreign investors largely balked at valuation expectations and left the government dependent on local buyers. The $29.4 billion listing attracted orders worth $106 billion and about 23% of shares were allocated to foreign buyers.
The top selling point of the latest offer is the chance to get one of these largest dividend in the world. Investors willing to ignore the high valuation and no buybacks will earn a $124 billion annual payout that Bloomberg Intelligence estimates will give the company a 6.6% dividend yield. .
Government Start the deal the same day that OPEC+ gathered to discuss oil output policy. The group agreed to extend production cuts until 2025, while scroll down some restrictions from the end of this year. That would allow Saudi Arabia to ease output restrictions on Aramco.
Aramco shares fell 1.9% on Sunday, valuing the company at about $1.8 trillion. The stock has fallen about 14% since the beginning of this year, when Bloomberg News first report government’s intention to sell off its shares and is currently trading at a price lowest level for more than a year.
The Saudi government owns about 82% of Aramco, while the kingdom’s wealth fund holds an additional 16%. The kingdom will continue to be the majority shareholder following the offering, which has been years in the making.
Crown Prince Mohammed bin Salman said in 2021 that the government would seek to sell more Aramco shares in the future. Those plans gained momentum a year ago, when the kingdom began working with advisers to study the feasibility of its next offer.
This deal is lined up Largest stock sales globally since Aramco listed. Proceeds will help fund initiatives to diversify the economy as the kingdom pushes into artificial intelligence, sports, tourism and projects like Neom.
The offer contributes to Saudi Arabia’s efforts to raise cash to cover its budget deficit. According to data compiled by Bloomberg, international debt sales this year have brought in $17 billion, more than any other emerging market sovereign. The government also sold $25.5 billion in domestic riyal notes, up from less than $20 billion in the same period last year.
The deal coincided with a period of strong demand for new shares in Saudi Arabia. In recent weeks, four companies have attracted one total orders worth 176 billion USD for their initial public offerings as fund managers flocked to deals that delivered near-guaranteed profits over the past two years.
The government is working with a series of banks for the sale. M. Klein & Co. is an independent financial advisor with Moelis & Co.
SNB Capital is taking on the lead management role. It is also a joint global coordinator along with Citigroup Inc., Goldman Sachs Group Inc., HSBC Group please, JPMorgan Chase & Company, Bank of America Corporation and Morgan Stanley. Al Rajhi Capital, BOC International, BNP Paribas SA, China International Capital Corp., EFG Hermes, Riyad Capital, Saudi Fransi Capital and UBS are the signatories of this deal.
Some of these banks also participated in Aramco’s IPO, when they were paid just over $100 million for their work. Those relatively small fees are common in the area. By comparison, banks including Goldman and JPMorgan split about $60 million from the backing Peloton Interactive Inc. only raised $1.2 billion in 2019
The government has not yet determined how much money banks will gain from the latest deal. Instead, the prospectus said the kingdom would pay fees to the registrars based on the total value of the offering as well as the costs associated with selling the shares.
In total, Saudi Arabia plans to sell 1.545 billion shares, representing a 0.64% stake. The government could raise an additional $1.2 billion if it exercises the option to sell more shares as part of the offering.
