Launched on June 2, 2024, the Aramco share offering has attracted a wave of investor interest. The offering involves the sale of 1.545 billion Aramco shares, representing 0.64% of the company’s total shares. The initial price range was set at 26.7 to 29 riyals per share (approximately $7.53 to $8.08).
Just hours after the launch, institutional investors had submitted orders exceeding the entire offering size. This strong demand was confirmed by a statement from one of the banks managing the deal, indicating that “books are covered on the full deal size within the price range.” In simpler terms, this means investor demand has significantly outpaced the available shares.
The banks managing the offering will continue accepting institutional orders until Thursday, June 6th. Following this, the share price will be determined, and trading is expected to commence on the Saudi Exchange on Sunday, June 9th.
Aramco Sale and Saudi Arabia’s Economic Future
The Aramco share offering is viewed as a crucial step in Saudi Arabia’s economic diversification plans. The kingdom, heavily reliant on oil revenue, is aiming to reduce its dependence on hydrocarbons and develop other sectors of its economy.
Proceeds from the share sale are expected to be directed towards the Public Investment Fund (PIF), a sovereign wealth fund that spearheads Saudi Arabia’s economic transformation agenda. The PIF invests in various sectors, including technology, infrastructure, and renewable energy.
The Aramco share offering also reflects the Saudi government’s efforts to attract foreign investment. Foreign direct investment has historically fallen short of targets set by the kingdom. A successful share offering could bolster investor confidence and encourage further foreign investment in Saudi Arabia.
OPEC+ Meeting and Aramco’s Production Strategy
The launch of the Aramco share offering coincided with a meeting of the OPEC+ group of oil producers. OPEC+ agreed to extend most of its existing production cuts well into 2025. This decision aims to support oil prices amidst concerns about slowing global demand and rising interest rates.
While the production cuts may impact Aramco’s overall oil output, the company has recently increased dividends to shareholders. Additionally, a new performance-linked payout mechanism was introduced in 2023, potentially mitigating the effects of lower production volumes.
The Aramco share offering marks a significant development for the Saudi economy. The strong investor interest and the potential for economic diversification suggest a positive outlook for the kingdom’s future. With Aramco remaining a major oil producer, the company’s production strategy will continue to be influenced by global oil market conditions and decisions made by OPEC+.
Source: Reuters
