Saudi Aramco’s $12 billion share sale came shortly after the deal was announced on Sunday – a boon for the government, which is seeking funds to finance a sweeping plan to transform the economy.
According to terms of the deal seen by Bloomberg News, the government had demand for all of the shares on offer within hours of the trading books opening. The books were covered within a price range of 26.70 riyals to 29 riyals.
Although it was not immediately clear what share of demand came from abroad, the order book shows a mix of local and foreign investors, said three people familiar with the matter, who asked not to be identified because the information is confidential.
The level of foreign participation is closely watched as an indicator of interest in Saudi assets. When Aramco went public in 2019, foreign investors largely rejected valuation expectations, leaving the government dependent on local buyers. The $29.4 billion IPO attracted orders worth $106 billion, and about 23 percent of the shares went to foreign buyers.
A top selling point of the latest offer is the chance to win one of the the largest dividends in the worldInvestors who can overlook the high valuation and lack of share buybacks could benefit from an annual payout of $124 billion, which would give the company a dividend yield of 6.6%, according to estimates by Bloomberg Intelligence.
The government initiated the deal On the same day, OPEC+ met to discuss oil production policy. The group agreed to extend its production cuts until 2025, while completion Some of these restrictions will be introduced later this year, allowing Saudi Arabia to ease production restrictions on Aramco.
Aramco shares fell 1.9 percent on Sunday and the company is now valued at about $1.8 trillion. The stock has fallen about 14 percent since the beginning of the year, Bloomberg News reported. first reported the government’s intention to sell a stake and is currently being lowest levels in over a year.
The Saudi government owns around 82 percent of Aramco, while the kingdom’s sovereign wealth fund holds another 16 percent. The kingdom will remain the majority shareholder even after the IPO that has been planned for years.
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 explore the feasibility of a follow-on offering.
The deal is one of the largest share sales worldwide since Aramco’s listing. The proceeds will help fund initiatives to diversify the economy as the Kingdom moves into artificial intelligence, sports, tourism and projects such as Neom.
The offering is part of Saudi Arabia’s efforts to raise money to offset a budget deficit. International debt sales have raised $17 billion this year, more than any other emerging market nation, according to data compiled by Bloomberg. The government has also sold $25.5 billion worth of riyal notes domestically, compared with nearly $20 billion in the same period a year ago.
The deal coincides with a period of strong demand for new share sales in Saudi Arabia. In recent weeks, four companies Total orders valued at $176 billion for their IPOs as fund managers flocked to deals offering virtually guaranteed returns over the past two years.
The government is working with a number of banks on the sale. M. Klein & Co. is acting as an independent financial advisor alongside Moelis & Co.
SNB Capital acts as lead manager. It is also joint global coordinator with Citigroup Inc., Goldman Sachs Group Inc., HSBC Holdings public limited company, JPMorgan Chase & Co., Bank of America Corp. 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 bookrunners on the deal.
Some of these banks were also involved in Aramco’s IPO and received just over $100 million for it. These relatively low fees are common in the region. By comparison, banks like Goldman Sachs and JPMorgan saved around $60 million for supporting Aramco. Peloton Interactive Inc. raised just $1.2 billion in 2019.
The government has not yet disclosed how much money the banks will earn from the latest deal. Instead, the prospectus says the kingdom will pay the lead managers fees based on the total value of the offering as well as costs associated with the share sale.
In total, Saudi Arabia plans to sell 1.545 billion shares, which corresponds to a stake of 0.64 percent. The government could raise another $1.2 billion if it exercises an option to sell more shares as part of the offer.