Saudi Arabia to Sell $13.1 Billion in Aramco Shares
Saudi Arabia plans to sell up to $13.1 billion worth of Aramco shares, testing international investor interest amid environmental concerns and high valuations.
Key Details of the Share Sale
Saudi Arabia’s plan to sell a significant portion of Aramco shares, valued at up to $13.1 billion, is a strategic move aimed at attracting a broader range of investors. The offering, codenamed Project Bond, is set to begin on June 2 and will continue until June 11. Approximately 10% of the shares are reserved for retail investors, with the remaining shares targeted at institutional investors. The shares are priced between 26.70 to 29 riyals ($7.12 to $7.73) each, valuing the company at around $1.87 trillion[1].
Environmental and Governance Concerns
The sale comes at a time when international investors are increasingly scrutinizing environmental, social, and governance (ESG) factors. Despite Aramco’s lucrative dividends and strong financial performance, some investors remain wary due to the company’s significant carbon footprint and the dominant control exerted by the Saudi government. Hasnain Malik, head of equity research at Tellimer, highlighted that these concerns could deter foreign investors who did not participate in Aramco’s initial public offering (IPO) back in 2019[1].
Implications for Saudi Vision 2030
The proceeds from the share sale are expected to fund various projects under Crown Prince Mohammed bin Salman’s Vision 2030, an ambitious plan to diversify the Saudi economy away from oil. Jim Krane, a research fellow at Rice University, noted that selling Aramco shares is a more straightforward funding mechanism compared to attracting foreign investment for Saudi Arabia’s gigaprojects[1]. These projects include the futuristic city of Neom, which is estimated to cost around $500 billion[5].
Market Reactions and Economic Context
The timing of the share sale coincides with a broader uptick in global stock offerings, which have reached their highest levels since 2021. Aramco’s sale is one of the largest in the past decade, making it a significant event in the international financial markets. Despite a 14.4% drop in net profit for the first quarter of 2024, Aramco continues to be a critical player in the energy sector, paying $31 billion in dividends to the Saudi government and shareholders[3].
Conclusion
As Saudi Arabia embarks on this major share sale, the world will closely watch how international investors respond. Balancing lucrative financial returns against environmental and governance concerns will be crucial. The success of this offering will not only impact Aramco’s future but also the broader economic strategy of Saudi Arabia as it strives to achieve the goals outlined in Vision 2030.
Bronnen
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