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Saudi Arabia plans to raise more than $11.2 billion in a secondary public offering of state oil giant Aramco after the shares were priced below the lower end of an expected range.
The company said on Friday it would issue 1.545 billion shares at a price of 27.25 Saudi riyals ($7.27) per share and expected to sell them when the market opens on Sunday. The company’s initial marketing pricing range is 26.70 to 29 Saudi riyals per share.
The price of 27.25 Saudi riyals was nearly 4% lower than the last settlement price of the public shares on the Tadāwul Saudi Arabia Stock Exchange.
The company’s stock price has fallen more than 2% since announcing the secondary offering on May 30. Investors typically expect new shares to be priced at a discount when they hit the public market due to an increase in the overall supply of shares available for trading.
The pricing decision was announced as global oil prices remain under pressure due to an uncertain demand outlook despite a typical seasonal increase in gasoline consumption during the summer. The influential Organization of the Petroleum Exporting Countries and its allies also announced on June 2 that they would extend formal and voluntary production cuts.
However, oil price pressure and the broader transition of global energy away from hydrocarbons do not appear to be dampening interest in Saudi Aramco’s latest offering. Reuters, citing anonymous sources, said the issuance was Cover four to five times and generated stronger international demand than during Aramco’s breakthrough IPO in 2019, when the company raised $29.4 billion. CNBC could not independently confirm the report.
A mainstay of Riyadh’s economy, Saudi Aramco has historically attracted investors for its large dividend payments. According to Factset data, as of June 7, the company’s dividend yield was as high as 6.81%, while the U.S. energy giant’s dividend yield was 3.33% Exxon Mobil and 4.18% from Chevron.
Aramco’s largest shareholders are the Saudi Arabian government, which holds more than 82% of the shares, and Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, which holds 16%.
Proceeds from the latest share sale will provide some much-needed relief to the Saudi Arabian government, which is currently funding a series of high-cost infrastructure “mega-projects” under its Vision 2030 economic diversification plan. Financing. kingdom $12 billion has been raised In three bond sales.
The Vision 2030 plan, aimed at weaning Saudi Arabia off oil revenue, is the flagship policy of Crown Prince and de facto leader Mohammed bin Salman. However, the plan is costly, with just one of the megaprojects it funds, the future city Neom, estimated to cost around $500 billion.
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