Saudi Arabia’s Aramco Considers Selling $50 Billion in Shares
Offering, likely on Riyadh exchange, would be largest in history of capital markets; similar previous plans have fallen through
Saudi Arabia’s on-again, off-again plans to list more shares of Aramco, the world’s most valuable oil company, appear to be on again.
The kingdom is considering selling a stake of as much as $50 billion, people familiar with the potential deal said, an amount that would be the largest offering in the history of capital markets.
After monthslong consultations with advisers, the kingdom has decided to host any new Aramco offering on the Riyadh exchange to avoid legal risks associated with an international listing, according to Saudi officials and other people familiar with the plan.
A final decision hasn’t been made on the timing of the deal, but some of the people familiar with the transaction say the kingdom could offer the shares before the end of the year.
Aramco has been sounding out potential investors, such as other multinational oil companies and sovereign-wealth funds, about participating in the deal, some of the people said.
Even more than most deals, there is a possibility this one gets postponed or canceled altogether. Riyadh has floated several different plans over the years aimed at raising funds via Aramco, some of which have ultimately faltered or been abandoned.
Last year Aramco considered selling additional shares on the Riyadh stock exchange and a secondary listing, possibly in London, Singapore or other venues, but decided market conditions weren’t favorable.
Aramco didn’t respond to requests for comment.
A share sale of $50 billion could prove difficult to pull off. The company set the previous record for the world’s largest initial public offering in 2019 when it raised $29.4 billion on the Tadawul, or the Saudi stock exchange.
The Ant Group’s IPO of more than $34 billion surpassed that amount in 2020.
The 2019 listing was a scaled-back version of the company’s original ambitions, which were to sell 5% of the company for as much as $100 billion, including on a major international exchange. But international investors were wary of governance issues and the price of the shares, which valued the company at $1.7 trillion. The domestic-only IPO ultimately listed 1.5% of the company.
Bloomberg reported in May that the kingdom was contemplating selling additional shares.
Saudi Arabia has long wanted to sell off chunks of the oil giant, part of a strategy crafted by de facto leader Crown Prince Mohammed bin Salman to monetize the country’s massive oil assets and use the proceeds to invest in industries outside of oil.
In April 2021, Mohammed said in a televised interview that the kingdom was in talks with unnamed foreign investors about selling stakes in Aramco, with options that included a 1% acquisition by a leading global energy company.
Aramco, majority owned by the Saudi government, said in May it would introduce an additional dividend tied to its annual financial performance, basing it on the company’s free cash flow. The move was partly aimed at attracting new investors after Aramco came under pressure for shareholders to pay more dividends, according to officials familiar with the matter.
Last month, Aramco posted a 38% drop in quarterly profit due to lower energy prices and production cuts, but boosted its dividend by more than half—highlighting the kingdom’s dependence on oil revenues.
Aramco’s dividend commitment has been a key source of funding for the Saudi government and a bellwether for energy investors—a large, recurring payout the company promised to make to lure investors to its long-delayed IPO in 2019.
Aramco’s decision to boost dividends has raised questions about whether the oil giant can balance the needs of its main shareholder with the investment requirements of a listed company.
In March, Aramco reported a record annual profit of $161 billion in 2022, the largest ever by an energy firm, cementing the kingdom’s dominance as the world’s most important oil producer.
The oil boom in part fueled Saudi Arabia’s willingness to pursue foreign policies and economic interests that were often at odds with the U.S. Last year, the kingdom—which is the de facto leader of the Organization of the Petroleum Exporting Countries—rebuffed U.S.
requests to pump more oil to help tame surging crude prices.
Saudi economic advisers in recent months have privately warned senior policy makers that the kingdom needs elevated oil prices for the next five years to keep spending billions of dollars on projects that have so far attracted meager foreign investment. Analysts estimate the kingdom needs to keep prices above $80 a barrel to finance the crown prince’s economic overhaul plans.