Saudi Arabia continues with its plan to transition away from a fossil fuel-based economy, selling billions of Saudi Aramco shares.
Saudi Aramco will offer up to $12 billion in shares to the market, Saudi Arabia’s government said on Friday. This is the first tranche of stocks put on the market since Saudi Aramco’s Initial Public Offering (IPO) in 2019.
The Saudi government is the biggest shareholder of Saudi Aramco and effectively rules it as a state-owned company. The oil giant, however, is also publicly traded on Saudi Arabia’s stock exchange Tadawul.
Thanks to its IPO, it’s possible to safely evaluate Saudi Aramco’s value. Currently, Saudi Aramco ranks sixth as the world’s highest-valued company with a total evaluation of $1.87 trillion. In the ranking of the most valued companies, Saudi Aramco is the first outside of the United States and the first not operating in the tech sector.
Riyadh announced on Sunday the sale of 1.545 billion shares, each valued between $7.12 and $7.73. This brings the total offer to $11.9 billion, or 0.64% of the company.
“This transaction provides an opportunity for current and new investors to build a sizeable position in Saudi Aramco at a price where we believe the company offers attractive value and growth to our shareholders,” the company’s CEO Amin Nasser said.
Nasser explained the timing of the sale is decided by the Saudi government, but it should start between June 6-7th. Premium investors will be able to access Saudi Aramco stocks on Sunday while retail investors will have to wait until Monday.
Restructuring the economy
The $12 billion sale will be managed by the Public Investment Fund (PIF), the kingdom’s sovereign wealth fund. The PIF currently manages $925 billion and plans to increase it to $1 trillion by 2025.
Saudi Arabia is currently using the PIF to drive the kingdom’s transition away from a fossil fuel-based economy. Saudi Aramco is still a massively profitable company, making $121 billion in net earnings in 2023.
However, many analysts believe the demand for fossil fuels already reached its peak. Without its revenues from oil shipments, Saudi Arabia needs to refocus its economy as quickly as possible.
The $12 billion sale of Saudi Aramco shares will go to finance part of this transition.
Saudi Arabia is currently planning several mega-projects that should bring investments, foreign businesses, and tourism to the country. One of these projects, NEOM, has an estimated cost of $500 billion, though some observers estimate it may plummet to $1.5 trillion.
NEOM is a megacity to be built in Saudi Arabia’s desert. Its futuristic look involves building the whole town in a straight line, a feat deemed almost impossible by many observers.
