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Saudi Arabia is revisiting its strategy of expanding the shares of Aramco, the world’s most valuable oil company.
A Potential Aramco Stock Sale of $50 Billion Offering
Reports suggest that the kingdom is currently contemplating the sale of shares worth up to $50 billion. Nevertheless, this move could potentially become the largest offering in the history of capital markets.
Saudi Arabia has made a strategic decision to host this offering on the Riyadh exchange, a decision rooted in efforts to mitigate legal risks often associated with international listings, based on consultations with trusted advisors.
Timing the Launch
Insiders suggest that the launch of these shares may take place before the year concludes, as reported by the Wall Street Journal. Over the past year, Aramco has engaged in discussions with potential investors, including multinational oil companies and sovereign wealth funds.
Previous Plans and Market Challenges
In the past, Aramco had explored the possibility of additional share sales on the Riyadh stock exchange and considered secondary listings in locations like London or Singapore.
However, these plans were abandoned due to unfavorable market conditions.
Challenges on the Horizon
It’s worth noting that achieving such a significant offering could be a formidable task. Aramco’s record-setting IPO in 2019, which raised $29.4 billion on the Saudi stock exchange, was already substantial.
In comparison, the Ant Group’s IPO in 2020 raised over $34 billion.
A Historical Perspective on Aramco Stock Sale
The 2019 listing, although impressive, was a scaled-back version of Aramco’s original ambitions. Initially, they aimed to sell 5% of the company for as much as $100 billion, which included a major international exchange.
However, concerns related to governance and share pricing led to a more cautious approach from international investors. Consequently, Aramco opted for a domestic-only IPO, listing only 1.5% of the company.
Saudi Arabia’s Long-Term Strategy
In May, Bloomberg reported Saudi Arabia’s contemplation of additional share sales. This aligns with the kingdom’s long-standing strategy to divest portions of the oil giant.
A Broader Vision of Aramco Stock Sale
This strategy of Aramco Stock Sale is a pivotal part of Crown Prince Mohammed bin Salman’s broader plan. Although, it aims to leverage the nation’s extensive oil assets and reinvest the proceeds into non-oil industries.
In conclusion, Saudi Arabia’s consideration of a substantial share sale by Aramco marks a significant development in the global oil industry. This strategic move reflects the kingdom’s commitment to managing its oil wealth wisely and diversifying its investment portfolio.
