Saudi Arabia is likely to announce a significant share sale for oil giant Aramco today, pending final approval from Crown Prince Mohammed bin Salman, insiders say. This new share offering on Riyadh’s Saudi Exchange, expected to start on Sunday, is the result of a long-term plan to sell more shares after Aramco’s record IPO in 2019 raised $29.4 billion.
Sources suggest the sale could happen as early as June, potentially raising around $10 billion. Aramco has been a major revenue source for the Saudi government, funding its ambitious economic reforms aimed at reducing dependency on oil.
The new share sale will help finance large domestic projects tied to this agenda. With foreign investment goals unmet and a looming budget deficit, Saudi Arabia is turning to Aramco’s equity sale and debt issuances for funding.
Aramco’s share price closed slightly lower on Thursday at 29.1 riyals ($7.76), giving it a market value of about $1.87 trillion. Despite a drop in profits, Aramco raised its dividends to nearly $98 billion in 2023.
Aramco has also expanded into refineries, petrochemical projects, and gas ventures internationally. Banks like Citi, Goldman Sachs, and HSBC are managing this share sale.
Saudi Arabia, under Crown Prince MbS, is investing heavily in diverse projects to shift the economy away from oil. However, lower oil prices have impacted economic growth, leading to a budget deficit. Aramco’s performance-based dividends and new share sale aim to attract more investors.
As the world’s top oil exporter, Aramco trades at a higher price-to-earnings ratio than its global peers. Despite a 12% drop in Aramco’s stock this year, ExxonMobil and BP have seen gains.
Saudi Arabia, leading OPEC, is expected to maintain current oil production cuts into the second half of 2024, with potential for further cuts depending on market conditions.
($1 = 3.7506 riyals)
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