Saudi Arabia’s oil giant sees massive stock offering sell out in hours as investors clamor for annual dividend payouts of $124 billion
Saudi Aramco shares worth $12 billion were sold shortly after the deal opened on Sunday, a gift to the government seeking funds to help pay for a massive economic transformation plan.
The government had ordered all the shares on offer within a few hours after the books opened, according to the terms of the deal seen by Bloomberg News. Book prices ranged from 26.70 riyals to 29 riyals.
While it was not immediately clear how much order came from abroad, the order book reflects a mix of domestic and foreign investors, said three people familiar with the matter, who declined to be identified because the information is private.
The extent of foreign participation will be closely monitored as an indicator of interest in Saudi assets. During Aramco's initial public offering in 2019, foreign investors largely held back on valuation expectations and left the government to rely on domestic buyers. The $29.4 billion listing attracted orders worth $106 billion, with about 23% of the shares allocated to foreign buyers.
One of the most important selling points of the latest offer is the opportunity to win one of the… The largest profits in the world. Investors willing to look past the steep valuation and lack of buybacks will benefit from a $124 billion annual payout that Bloomberg Intelligence estimates will give the company a 6.6% dividend yield.
the government The deal has begun On the same day OPEC+ met to discuss oil production policy. The group agreed to extend production cuts until 2025, while… Inactivity Some of those restrictions will come later this year. This would allow Saudi Arabia to ease production 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, according to Bloomberg News Reported for the first time The government's intention to offload the share, and is currently trading in Lowest levels In more than a year.
The Saudi government owns about 82% of Aramco, while the Saudi Wealth Fund owns an additional 16% stake. The Kingdom will remain the main shareholder after the offering, which has been in the works for years.
Crown Prince Mohammed bin Salman said in 2021 that the government was looking to sell more Aramco shares in the future. These plans gained momentum a year ago, when the kingdom began working with consultants to study the feasibility of a subsequent offer.
The transaction is classified as The largest stock sales in the world Since the listing of Aramco. The proceeds will help fund initiatives to diversify the economy as the Kingdom moves towards artificial intelligence, sports, tourism and projects such as NEOM.
The offer adds to Saudi Arabia's efforts to raise funds to fill the budget deficit. International debt sales this year brought in $17 billion, more than any other emerging market country, according to data compiled by Bloomberg. The government also sold $25.5 billion in rial notes domestically, up from just under $20 billion during the same period last year.
The deal coincides with a period of strong demand for new stock sales in Saudi Arabia. In recent weeks, four companies have drawn A Combined $176 billion in orders For its initial public offerings, fund managers flocked to deals that offered near-guaranteed returns over the past two years.
The government is working with a series of banks on the sale. M. Klein & Co. As an independent financial advisor alongside Moelis & Co.
SNB Capital acts as lead manager. It is also a joint global coordinator alongside Citigroup Inc., Goldman Sachs Group Inc., HSBC Holdings Plc, JPMorgan Chase & Co. and Bank of America Corp. And Morgan Stanley. The deal is being managed by Al Rajhi Capital, BOC International, BNP Paribas SA, China International Capital Corp, EFG Hermes, Riyad Capital, Saudi Fransi Capital, and UBS.
Some of these banks also worked on Aramco's IPO, when they were paid just over $100 million for their work. These relatively small fees are common in the area. By comparison, banks including Goldman and JPMorgan split about $60 million in aid for Peloton Interactive Inc. On raising just $1.2 billion in 2019.
The government has not yet determined the amount that the banks will realize from the latest deal. Instead, the prospectus stated that the Kingdom would pay a fee to bookrunners based on the total value of the offering plus expenses associated with the sale of shares.
In total, Saudi Arabia plans to sell 1.545 billion shares, representing a stake of 0.64%. The government could raise an additional $1.2 billion if it exercises the option to sell more shares as part of the offering.
