Aramco becomes an investor test
Saudi Arabia wants to sell its “crown jewel” shares
30.05.2024, 19:28
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Prince Salman’s kingdom is only partially satisfied with Saudi Aramco’s IPO. Now Riyadh wants to attract new investors to the oil giant and increase its value by selling shares.
Saudi Arabia plans to sell billions of dollars worth of shares in oil company Saudi Aramco. The kingdom is expected to launch the sale by Sunday, people familiar with the matter said. The plan is another test of investor demand for Saudi Arabia’s “crown jewel.”
The oil company had disappointed with a valuation of 1.7 trillion US dollars when it went public in 2019. Saudi Arabia’s de facto leader, Crown Prince Mohammed bin Salman, had aimed for 2 trillion dollars. Saudi Aramco’s valuation has since approached the 2 trillion dollar mark. This has encouraged Saudi Arabia to sell part of its majority stake in the company.
The offering is expected to be priced, as is customary, at a discount to Aramco’s current share price to lure investors. The aim for Saudi Arabia would be to achieve a price above IPO levels, bankers and institutional investors say.
Aramco a blue-chip company
Aramco had issued its shares at 32 Saudi riyals in the IPO, which currently equates to $8.53 per share. However, the new offering will be priced at the so-called adjusted IPO price of 26.45 riyals. This price takes into account the distribution of so-called loyalty shares to Saudi nationals who have held Aramco shares continuously for 180 days since the IPO.
The latest offering is expected to attract strong demand as Aramco is a blue-chip company that pays a recurring and increasing dividend. With a dividend yield of 6.6 percent, the stock is also cheap compared to its US peers. ExxonMobil and Chevron have dividend yields of 3.3 and 4.2 percent respectively.
Nevertheless, shares in the large US energy companies have proven to be the better choice for investors, at least since Aramco’s IPO. During this period, Aramco shares have increased by more than 20 percent on a US dollar basis, including dividends. By comparison, Exxon has increased by almost 107 percent and Chevron by 65 percent.