Saudi Arabia announces landmark Aramco stake sale worth $13.1 billion

Saudi Arabia’s government has announced a landmark sale of shares in state oil giant Aramco, which could raise up to $13.1 billion as per Reuters estimates.

The share sale, filed on Thursday, involves offering 1.545 billion shares, or 0.64% of the company, according to Aramco’s filing on the Saudi Exchange. The price range is expected to be between 26.7 to 29 riyals per share ($7.12 to $7.73). The sale is expected to close on June 11.

Greenshoe option to boost offering value

The deal’s value could reach $13.1 billion if the greenshoe option is fully exercised, allowing for the sale of nearly 1.7 billion shares, or a 0.7% stake, Reuters calculated. This option enables bankers to stabilise the price of the offering by using additional shares.

Aramco’s shares closed slightly lower on Thursday at 29.1 riyals ($7.76), reflecting a market capitalisation of about $1.87 trillion.

The share sale is part of a broader strategy to attract both domestic and international investors, increase market liquidity, and enhance Aramco's global index weighting.

The latest offering marks the culmination of a multi-year effort to further privatise one of the world’s most valuable companies. Aramco’s record-setting IPO in 2019 raised $29.4 billion, and since then, the company has been a key source of funding for Saudi Arabia's economic diversification initiatives.

Amin Nasser, Chief Executive Officer of Aramco, emphasised to media that the strategic benefit of the offering is an “opportunity to increase liquidity and to increase our global index weighting.”

Economic and strategic implications

Despite lower oil prices and reduced production, Aramco remains a critical asset for Saudi Arabia.

The government is using revenues from the company to finance large domestic projects, aiming to transform various sectors such as renewable energy, technology, tourism, logistics, and manufacturing.

Hasan Alhasan, a senior fellow at the International Institute for Strategic Studies, told Reuters that the sale of Aramco shares and debt issuances are essential for financing the kingdom’s diversification efforts.

The funds will be used to support Crown Prince Mohammed bin Salman's ambitious plans to diversify the kingdom's economy, reducing its reliance on oil revenues as part of Saudi Vision 2030 programme.

Market reaction and financial performance

Aramco continues to generate significant cash flow, supporting a near $100 billion dividend payout in 2023 despite a drop in profits. Aramco has also been active in expanding its global footprint, investing in refineries and petrochemical projects, and entering the liquefied natural gas market.

The share sale, scheduled to begin on June 2 and close on June 11, is targeted at institutional investors both within Saudi Arabia and globally, as well as eligible retail investors in the kingdom and other GCC countries.

Approximately 10% of the offering will be reserved for retail investors, depending on demand. The move is expected to increase the number of unique shareholders, enhance liquidity, and improve Aramco’s ranking in global indices.

Global oil market dynamics

As a key member of OPEC, Saudi Arabia’s decisions significantly impact global oil prices.

Aramco currently produces about 9 million barrels of crude daily, in compliance with OPEC+ output cuts. The upcoming OPEC+ meeting is anticipated to maintain these cuts, potentially affecting oil prices and Aramco's production levels.

The Kingdom's focus on diversifying its economy includes adapting to current economic and geopolitical challenges, which may involve adjusting projects under its Vision 2030 programme.

Saudi Arabia’s latest Aramco share sale is a strategic move to support the kingdom's long-term economic diversification goals.

By leveraging its state oil giant, the government aims to attract investment, increase liquidity, and fund projects that will reduce the country's dependence on oil, positioning Saudi Arabia for sustainable growth in a rapidly changing global economy.