Saudi Aramco, the world’s largest oil company, is reportedly exploring a significant secondary offering worth $50 billion on the Riyadh stock exchange, according to sources cited by the Wall Street Journal. The potential sale is anticipated to be completed before the end of this year, marking a pivotal move for the oil giant. Saudi Aramco has been actively engaging with potential investors, including multinational oil corporations and sovereign-wealth funds, to gauge their interest in participating in this substantial offering.
The decision to host this offering on the Riyadh stock exchange comes as Saudi Aramco aims to mitigate potential legal risks often associated with international listings, as reported by Reuters. The company’s current market valuation stands at a staggering $2.25 trillion, and its shares have witnessed an impressive 19.6% increase in value this year alone. This move follows the groundbreaking initial public offering (IPO) of Saudi Aramco in 2019, which raised approximately $29.4 billion, setting a historic precedent as the largest IPO in history.
Plans for Aramco to sell additional shares were initially put on hold last year due to unfavorable market conditions. However, during the Future Investment Initiative Conference held in January 2021, Crown Prince Mohammed bin Salman, the de facto ruler of the Kingdom, made a bold declaration. He affirmed Aramco’s intention to sell more shares, with the primary objective of strengthening the nation’s primary sovereign wealth fund.
In the same month, Saudi Aramco also announced a substantial dividend payout of nearly $10 billion, with the majority of the funds allocated to the government. These strategic financial moves underscore the company’s commitment to supporting the Kingdom’s economic initiatives and long-term goals.
Despite the grandeur of these announcements, Saudi Aramco faced some challenges, as reflected in its second-quarter financial results. The company reported a 38% decline in profits, with earnings falling to 112.81 billion riyals ($15.61 billion) compared to the same period the previous year. This decline can be attributed to a combination of factors, including fluctuating global oil prices and the ongoing impacts of the COVID-19 pandemic on the energy sector.
To navigate this complex landscape, Saudi Aramco is actively collaborating with a team of seasoned advisers, strategists, and experts to expedite the implementation of its offering on the Saudi stock exchange. Simultaneously, the Kingdom itself is seeking innovative avenues to fund its ambitious economic agendas, aligning its interests with those of the oil giant.
As both Saudi Aramco and the Kingdom move forward with their respective financial strategies, the global investment community will closely monitor the developments surrounding this landmark secondary offering. With a potential $50 billion infusion into the Saudi stock exchange, this initiative has the potential to shape the economic landscape of the region and further cement Saudi Aramco’s position as a global energy powerhouse.
$1 = 3.7505 riyals
Source: Reuters
