DHAHRAN (The Thursday Times) – Saudi Arabia is set to make a crucial decision on Thursday regarding the sale of at least $10 billion worth of shares in Saudi Aramco, the world’s largest oil company. This move is part of the kingdom’s ongoing strategy to raise capital for its sovereign wealth fund, the Public Investment Fund (PIF).
For the past several days, advisers to Saudi Aramco have been in the kingdom, making final preparations for a secondary share offering. The ultimate decision is expected to be made by Crown Prince Mohammed bin Salman, according to sources familiar with the situation.
A final determination on the size of the share sale will also be made on Thursday, with one insider suggesting that the target could be significantly higher than initially anticipated.
If the sale proceeds, it would mark the culmination of a long-standing plan to sell additional shares in the state-owned oil giant, following its record-breaking initial public offering (IPO) in 2019. The timing of the offering coincides with OPEC’s ministerial meeting on Sunday, during which the Saudi-led delegation will decide on oil production levels for the remainder of the year.
Stop-start preparations for Saudi Aramco share sale
Saudi Aramco and its advisers have experienced several stop-start efforts to proceed with a share sale in recent months. On at least two prior occasions, the government opted to halt the sale at the last moment, according to one source.
The renewed focus on the sale comes as Saudi Arabia reassesses some of its mega-projects amidst concerns over the financial strain of its ambitious economic diversification plans under Vision 2030.
The PIF, the primary investment vehicle for the kingdom’s economic transformation, is expected to be the main beneficiary of any funds raised through the sale of shares in Saudi Aramco, the nation’s most valuable asset.
The PIF’s role in Saudi Arabia’s economic diversification
The PIF, under the guidance of Crown Prince Mohammed bin Salman, is central to Saudi Arabia’s Vision 2030 – the ambitious initiative aimed at diversifying the kingdom’s economy away from oil dependency. The PIF was the primary recipient of funds from the 2019 IPO, where Saudi Arabia raised $25.6 billion by selling 1.5% of the company, equivalent to 3 billion shares at SR32 per share. The proceeds went directly into the sovereign wealth fund.
An additional 450 million shares were sold a month later, bringing the total proceeds from the 2019 IPO to $29.4 billion.
Saudi Aramco shares and dividend payments
As of Thursday, Saudi Aramco shares closed at SR29, reflecting a decline of about 25% from their 2022 peak. Despite this, Saudi Aramco remains a key revenue generator for the Saudi government, and its dividend payments continue to provide significant funding for the PIF.
In 2023, Saudi Arabia transferred 4% of Saudi Aramco shares to the PIF, followed by an additional 8% transfer in March 2024. These transfers have bolstered the size of the PIF’s assets under management and provided a steady revenue stream through dividends. In fact, Saudi Aramco increased its shareholder payout to nearly $100 billion last year, following its second-highest annual profit in history.
PIF’s growth and future outlook
The PIF had $925 billion in assets under management by the end of 2023, and its goal is to expand that figure to approximately $1 trillion by 2025. The PIF has been consistently receiving financial boosts from the Saudi government in recent years, including $40 billion from the central bank’s foreign reserves during the onset of the COVID-19 pandemic.
The ongoing sale of Saudi Aramco shares and the anticipated funds from the secondary offering will likely help the PIF achieve its ambitious growth targets. These funds are expected to support a wide range of projects aimed at reshaping Saudi Arabia’s economy and global positioning.
