Saudi Arabia has sold $11.2bn of shares in Saudi Aramco at a price towards the low end of its expectations, suggesting investors remain cautious about the future prospects of the world’s largest oil company.
The sale raises new funds for the government, which ran a budget deficit of $3.3bn in the first quarter of the year as it struggled to meet the spending demands of Vision 2030, Crown Prince Mohammed bin Salman’s plan to transform the economy.
The government placed nearly 1.55bn shares, or 0.64 per cent of the company, at SR27.25 ($7.27) apiece, a 6 per cent discount to the closing price of SR29 on the day before the deal was announced.
It had initially set a range of SR26.7 to SR29 for the sale.
The offering was the first big attempt by Aramco to woo foreign investors, with its senior executives, including chief executive Amin Nasser, flying to London and New York for roadshows.
Attracting international demand was “the big objective this time”, said one person familiar with the process, though they noted that some institutions were not set up to trade shares listed on Saudi Arabia’s Tadawul index. “Even for global investors it’s still a bit off the beaten track,” they added.
Nevertheless. the company said the offering was fully subscribed, with institutions receiving 90 per cent of the shares, and retail investors taking the rest.
Ahead of its blockbuster 2019 initial public offering, which raised $25.6bn, Aramco was forced to scale back its ambitions and focus on local investors and state funds in the Gulf as foreign institutions balked at the lofty valuation sought by Saudi officials and fretted over the company’s corporate governance and the future demand for oil.
This time around, the company pointed to its improved dividend yield as it made a play to broaden its shareholder base. Aramco has promised to pay out $124bn this year as its main shareholder, the Saudi government, leans on the oil group to fund its ambitious plans.
“You are looking at a 6.5 per cent or 7 per cent yielding stock, and that compares with around 4 per cent during the original 2019 listing,” said Neil Beveridge, head of equity research for Bernstein in Hong Kong.
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