Saudi Aramco Launches Secondary Public Offering

Saudi Arabian Oil Co. (Saudi Aramco) announced on Sunday the initiation of a secondary public offering of 1.545 billion ordinary shares, representing 0.64% of the company’s total issued shares, with a price range set at SAR 26.70 to 29.00 per share. The offering, disclosed via the Saudi Press Agency (SPA), marks a significant step in the Kingdom’s ongoing efforts to deepen capital markets and broaden investor participation in its flagship energy enterprise.

Context and Background

This secondary public offering (SPO) follows Saudi Aramco’s historic initial public offering (IPO) in 2019, which raised USD 29.4 billion and remains the world’s largest IPO to date. The new offering is part of Saudi Arabia’s broader strategy to enhance market liquidity, attract foreign investment, and support Vision 2030 economic diversification goals. The offering document is available at www.aramco.com/share-offering.

The SPO is structured to accommodate both institutional and individual investors, reflecting the Kingdom’s commitment to inclusive economic participation. The price range of SAR 26.70 to 29.00 per share provides a clear framework for potential subscribers.

Key Details

Individual investors wishing to subscribe must do so at the highest price within the offer price range using the electronic channels of the receiving entities, specifying the number of shares they wish to purchase. In cases where (a) the final offer price is lower than the retail subscription price, (b) not all requested shares are allocated, or (c) the final offer price exceeds the closing market price on Thursday, June 6, 2024, any excess or full subscription amounts will be refunded by Tuesday, June 11, 2024.

Settlement for institutional investors will be conducted through out-of-market negotiated trades in accordance with the Saudi Exchange’s “negotiated trades” framework. Individual investor settlement will be facilitated by the lead manager and the Securities Depository Center Company (Edaa). Offer shares allocated to individual investors will be directly transferred to their investment portfolio accounts with the brokers of the receiving entities.

The deposit of offer shares allocated to institutional or individual investors will be completed before the market opens on Sunday, June 9, 2024, allowing investors to trade their shares on the same day. Refunding of excess subscription amounts to individual subscribers will be equivalent to the difference between the subscription value of SAR 29 per share and the final offer price, as well as any surplus for unallocated shares, by Tuesday, June 11, 2024.

Implications and Impact

This SPO is expected to enhance liquidity on the Saudi Exchange (Tadawul), attract further foreign direct investment, and reinforce Saudi Aramco’s position as a global energy leader. It also signals the Kingdom’s proactive approach to capital market development, aligning with the Financial Sector Development Program under Vision 2030. The offering provides an opportunity for a wider base of investors to participate in the company’s growth story, which is underpinned by Saudi Arabia’s vast hydrocarbon reserves and low-cost production.

Internationally, the SPO underscores Saudi Arabia’s role as a reliable energy supplier and a key player in global financial markets. It may also pave the way for similar offerings from other Saudi state-owned enterprises, further integrating the Kingdom into the global investment landscape.

Vision 2030 Alignment

This secondary public offering directly supports Vision 2030’s objectives of diversifying the economy, increasing private sector participation, and developing a robust capital market. By broadening investor access to Saudi Aramco, the Kingdom reinforces its commitment to transparency, economic reform, and sustainable growth, ensuring that the benefits of its energy wealth are shared more widely. As Saudi Arabia continues its transformation, such initiatives will be pivotal in achieving long-term prosperity and global competitiveness.

20 Questions

Q1. What is the size of the secondary public offering by Saudi Aramco?

A1. The offering consists of 1.545 billion ordinary shares, representing 0.64% of Saudi Aramco’s total issued shares. This move aims to increase the company’s free float and market liquidity.

Q2. What is the price range for the offer shares?

A2. The price range is set at SAR 26.70 to SAR 29.00 per share. This range provides flexibility for investors to subscribe at a price within the specified limits.

Q3. How can individuals subscribe to the offering?

A3. Individuals can subscribe at the highest price within the offer price range using the electronic channels of the receiving entities. They must specify the number of shares they wish to purchase.

Q4. What happens if the final offer price is lower than the retail subscription price?

A4. If the final offer price is lower, any excess subscription amounts will be refunded to individual investors by Tuesday, June 11, 2024. This ensures fairness in the allocation process.

Q5. When will the offer shares be deposited into investors’ accounts?

A5. The deposit of offer shares allocated to institutional or individual investors will be completed before the market opens on Sunday, June 9, 2024. Investors can trade their shares on the same day.

Q6. How will institutional investors settle their shares?

A6. Institutional investors will settle through out-of-market negotiated trades in accordance with the Saudi Exchange’s “negotiated trades” framework. This facilitates efficient large-volume transactions.

Q7. Who facilitates the settlement for individual investors?

A7. The lead manager and the Securities Depository Center Company (Edaa) will facilitate the settlement for individual investors. Shares will be transferred directly to their investment portfolio accounts.

Q8. What is the refund process for excess subscription amounts?

A8. Refunds will be equivalent to the difference between SAR 29 per share and the final offer price, plus any surplus for unallocated shares. Refunds will be processed by June 11, 2024.

Q9. Why is Saudi Aramco conducting this secondary public offering?

A9. The offering aims to broaden the investor base, enhance market liquidity, and support Saudi Arabia’s Vision 2030 economic diversification goals. It also provides an opportunity for more investors to share in Aramco’s growth.

Q10. What percentage of Saudi Aramco’s shares is being offered?

A10. The offering represents 0.64% of Saudi Aramco’s total issued shares. This is part of the company’s strategy to increase its free float on the Saudi Exchange.

Q11. How does this offering align with Vision 2030?

A11. It supports Vision 2030 by deepening capital markets, attracting foreign investment, and promoting economic diversification. It also enhances transparency and private sector participation in the Kingdom’s economy.

Q12. What is the role of the Saudi Exchange in this offering?

A12. The Saudi Exchange (Tadawul) provides the platform for listing and trading the offer shares. It also facilitates the negotiated trades framework for institutional settlement.

Q13. When will the book-building period end?

A13. The book-building period ends on Thursday, June 6, 2024. This is the last day for institutional investors to submit their bids for the offering.

Q14. Can individual investors trade their shares immediately after allocation?

A14. Yes, once the shares are deposited into their accounts before market open on June 9, 2024, individual investors can trade them on the same day. This provides immediate liquidity.

Q15. What is the significance of the offering for global investors?

A15. It offers global investors an opportunity to invest in the world’s largest oil company, known for its low-cost production and vast reserves. It also signals Saudi Arabia’s openness to foreign investment.

Q16. How does this offering affect Saudi Aramco’s ownership structure?

A16. The offering slightly reduces the government’s stake, increasing the free float. The government remains the major shareholder, ensuring continued strategic control.

Q17. What are the key dates for investors to remember?

A17. Key dates include the end of book-building on June 6, 2024, deposit of shares on June 9, 2024, and refunds by June 11, 2024. Investors should monitor these dates closely.

Q18. What is the expected impact on the Saudi stock market?

A18. The offering is expected to boost liquidity and trading volumes on the Saudi Exchange. It may also attract more foreign investment, enhancing market depth and stability.

Q19. How does this offering reflect Saudi Arabia’s economic reforms?

A19. It demonstrates the Kingdom’s commitment to privatizing state assets and developing its capital markets. These reforms are central to Vision 2030’s goal of a diversified economy.

Q20. Where can investors find the offering document?

A20. The offering document is available at www.aramco.com/share-offering. Investors should review it carefully before subscribing to the offering.

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