Saudi Aramco's IPO attracts investors in a deal worth about $13.1 billion

The secondary public offering of Aramco shares in the Saudi stock market witnessed the coverage of all offering shares shortly after the start of creating the order book for institutions with a size of $12 billion, in a process that began today, Monday, from 9 am Saudi time and ends at 5 pm on Wednesday, June 5, 2024.

It is worth noting that the number of offering shares that will be allocated to the category of individual subscribers is 154.5 million offering shares, representing 10% of the total offering shares, amounting to approximately 1.545 billion shares.

 It is noteworthy that individual investors can apply to subscribe for 10 shares or any of their multiples at the individual subscription price, which represents 29 riyals, which is the upper limit of the announced price range from which individuals can subscribe. The allocation will also be made to individuals based on the final offering price, which will be announced after the book building period ends on Friday, June 7, 2024.

The banks participating in the process are scheduled to receive investor requests from institutions until Thursday, as the offering took place on the first day in a very large way by institutions in the first hours of accepting applications, as they will price the shares the next day, and it is expected that trading will begin on the offering shares. New, next Sunday on the Saudi Stock Exchange.

The banks could increase the supply by another billion dollars and if all shares are sold, the Saudi government will reduce its stake in the world's largest oil exporter by 0.7%.

The largest investment banks in the world are also helping to manage the sale process, namely Citi, Goldman Sachs, HSBC, JP Morgan, Bank of America, and Morgan Stanley, in addition to local institutions, namely the National Bank of Saudi Arabia, Al Rajhi Capital, Riyad Capital, and Saudi Fransi.

Aramco raised its dividends and introduced a new distribution mechanism linked to performance last year, despite the decline in profits themselves as a result of reducing the production volume of about 9 million barrels per day of crude oil, or approximately 75 percent of its maximum capacity.

 In the same context, the chief market analyst at XTB, Hani Abuagla, said in press statements.

This secondary offering came as a percentage of the Saudi government’s share in Aramco, and it is not a new offering to increase the number of shares currently listed on the Saudi Stock Exchange, and that the proceeds from the sale of these shares will go to the Saudi government, which may use them to fill its current financial deficit or to finance some huge projects that government is working on it, according to Abuagla.

It must be recalled that the Saudi government directly owns slightly more than 82% of Aramco, and the Public Investment Fund owns 16%, of which 12% is owned directly and 4% is owned through its subsidiary Sanabel Company, and the rest is owned by investors in the market.

The Aramco IPO occurred primarily on the Saudi Stock Exchange and was traded in December 2019, offering 1.5% of the company's total. The IPO raised approximately $29.6 billion, making it the largest IPO in history at the time, surpassing Alibaba's $25 billion IPO in 2014.

The second stock offering happened a few days ago and offered 0.642% of the company which generated $13 billion. However, in this offering, institutions accounted for 90% of the total supply, leaving only 10% for individual investors. The reaction of the market was pessimistic, as the company's shares fell 2% on the first day after the offering.

The company's share price has reached relatively low levels, especially compared to international oil prices. After the OPEC+ decision to extend the cuts, the balance between global supply and demand is the basic scenario, which supports oil prices remaining at relatively high levels. The upcoming offering combined with the increased interest in the company from investors gives more opportunities for stock prices to rise.