Saudi Arabia is mulling a significant move in its economic landscape. According to sources familiar with the matter, the kingdom is considering a multi-billion dollar share sale of its oil and gas giant, Saudi Aramco, as early as June. This potential offering, which could raise around $10 billion, would be one of the biggest stock deals ever witnessed in the Middle East and could signal a crucial step towards Saudi Arabia’s ambitious economic diversification goals.
Details Underway, Public Offering Likely
The specifics of the share sale are still being ironed out, with sources emphasizing that the details could change. However, two key points emerge. Firstly, the offering is expected to be a full-fledged, marketed sale conducted on the Saudi stock exchange in Riyadh. This approach stands in contrast to an accelerated sale completed over a few days. Secondly, while both Aramco and the Saudi government’s communication office have declined to comment, the planned sale aligns perfectly with the kingdom’s long-term economic vision.
Saudi Arabia’s Vision 2030 plan is a strategic roadmap aimed at reducing the nation’s dependence on oil revenue and fostering a more diversified economy. The country holds a substantial 90% stake in Aramco, and the oil giant’s dividends are a critical source of income for the government. Despite facing lower earnings in the first quarter of 2024 due to a decline in oil prices and volumes sold, Aramco still expects to pay a hefty $31 billion in dividends this year.
Aramco’s performance on the stock market paints a mixed picture. Since its record-breaking initial public offering (IPO) in 2019, the world’s largest IPO to date, Aramco’s share price has seen some volatility. Initially, the stock rose from its IPO price of 32 riyals to a high of 38.64 riyals a year ago. However, recent times haven’t been as rosy, with Aramco shares closing at 29.95 riyals on Thursday.
Potential Benefits: A Multi-Pronged Approach
The potential Aramco share sale offers several potential benefits for Saudi Arabia. Firstly, the $10 billion raised could provide a significant financial boost to the government, allowing for further investment in non-oil sectors outlined in Vision 2030. Secondly, the offering could broaden Aramco’s investor base, potentially attracting new capital and expertise. Finally, a successful sale could bolster confidence in the Saudi economy and its commitment to diversification.
While the details of the Aramco share sale remain fluid, the very consideration of such a move is a significant development. It suggests that Saudi Arabia is prepared to take concrete steps towards reducing its reliance on oil and building a more diversified and resilient economy. The success of this potential offering will be closely watched by investors and analysts around the world, with the outcome serving as an indicator of Saudi Arabia’s progress toward achieving the ambitious goals laid out in Vision 2030.
Source: Reuters
