The $12 billion share offering by Saudi Aramco was fully subscribed quickly after it opened on Sunday, which is good news for the government, which is looking to raise money to support a significant economic transformation plan.
Within hours of the books opening, the government received orders for every share available, as per the terms of the agreement obtained by Bloomberg News. Books ranging in price from 26.70 to 29 riyals were included.
The order book showed a mix of domestic and foreign investors, though it was not immediately clear how much of the demand came from abroad, according to three people with knowledge of the situation who wished to remain anonymous because the information is confidential.
We'll be keenly monitoring the level of foreign involvement as a sign of interest in Saudi assets.
Foreign investors have mostly objected to the government's expectations for valuation during Aramco's 2019 IPO, leaving the government dependent on domestic purchasers. Orders totaling $106 billion were placed in response to the $29.4 billion IPO, with roughly 23% of the shares going to international bidders.
The opportunity to benefit from one of the largest payouts in the oil business is one of the latest offer's main selling points.
Investors who could overlook the company's high valuation and lack of buybacks may profit from an estimated $124 billion yearly payout, which according to Bloomberg Intelligence will give the business a 6.6 percent dividend yield.
Aramco's stock dropped as much as 2.9% to 28.30 riyals on Sunday, putting the company's valuation at roughly $1.8 trillion. Since the beginning of the year, when Bloomberg News first revealed the government's plan to sell a stake, the stock has decreased by roughly 14%, and it is presently trading at its lowest points in more than a year.
Aramco is owned by the Saudi government to the tune of around 82%, with the Kingdom's wealth fund owning the remaining 16%. Following the transaction, the Kingdom will remain the primary shareholder.
In 2021, Crown Prince Mohammed bin Salman declared that more Aramco shares would likely be sold by the government in the future. When the Kingdom started collaborating with advisors to investigate the viability of a follow-on offer, those plans acquired impetus.
Since Aramco's debut, this transaction is among the biggest share sales made worldwide.
The money raised will go toward supporting the Kingdom's efforts to diversify its economy as it ventures into new areas including sports, tourism, artificial intelligence, and projects like Neom.
Saudi Arabia is stepping up its efforts to raise money to close a budget shortfall with this offer.
The agreement was initiated by the government just hours before an OPEC+ meeting to talk about oil output policies.
Delegates said the group had the outlines of an agreement to extend supply cuts until the end of the year, which would maintain Saudi Arabia's production close to its lowest point in almost three years.
The agreement is made during a time when Saudi Arabia is experiencing high demand for fresh share sales. Four companies received orders totaling $176 billion in the last several weeks for their IPOs, attracted by fund managers who snapped at offers of nearly assured profits over the previous two years.
Regarding the sale, the government is collaborating with several banks. In addition to Moelis & Co., M. Klein & Co. acts as an independent financial adviser.
