Saudi Aramco (2222), also known as Arabian Oil Company sold its new shares within hours of opening for orders.
This “historic transaction” could raise approximately $13 billion.
High Demand
The government, which owns about 82% of Aramco, is offering 1.545 billion shares to investors (0.64% of the company’s shares).
The price range is between 26.7 and 29 riyals per share, totaling just under $12 billion at the upper limit of the range.
A book-runner for the secondary offering announced that the books were fully covered within the price range.
This indicates that demand exceeded the shares available for sale.
It is noteworthy that banks can increase the offer by an additional $1 billion.
If all shares are sold, the Saudi government’s stake in “the world’s largest oil exporter” will decrease by 0.7%.
So What
The “additional offering” serves as a gauge of the kingdom’s attractiveness to foreign investors.
This is a “key factor” in the state’s ambitious plan to diversify its economic resources.
Analysts and sources have noted that the sale will accelerate the country’s efforts to move away from its “oil addiction,” as described by Saudi Crown Prince Mohammed bin Salman.
The Public Investment Fund (PIF) is expected to be the “biggest beneficiary” of the offering proceeds.
PIF is leading a “massive agenda” that has invested tens of billions of dollars in everything from sports to futuristic cities.
Some Context
Secondary offerings, where the main shareholder sells an additional stake in the market, aim to increase market liquidity.
Additionally, they attract new investments.
This is because a “high free float percentage” leads to these companies being listed on regional and global indices, which are tracked by global investment funds.
The Saudi Capital Market Authority is encouraging these offerings to increase the attractiveness of the stock exchange to investors.
This is achieved by increasing the number of tradable shares of listed companies and boosting the market’s weight in emerging market indices.
Moreover, it helps to “diversify the investor base” in the local market.
Now What
Participating banks will receive institutional investor orders until next Thursday.
The pricing of the shares will be determined the following day.
Trading of the “new offering shares” is expected to start next Sunday on the “Tadawul” stock exchange.
