Saudi Aramco Launches Secondary Public Offering on June 2

Saudi Aramco, the Kingdom’s national oil company, announced on Thursday that it will launch a secondary public offering of its ordinary shares on Sunday, June 2, 2024, offering 1.545 billion shares—approximately 0.64% of the company’s issued shares—with a price range expected between SAR 26.7 and SAR 29 per share. The offering, revealed via the Saudi Press Agency (SPA), marks a significant milestone in the company’s ongoing engagement with global capital markets and aligns with Saudi Arabia’s Vision 2030 objectives to diversify the economy and attract international investment.

Context and Background

This secondary offering follows Aramco’s landmark initial public offering (IPO) in December 2019, which raised $29.4 billion and remains the world’s largest IPO to date. The new offering represents a strategic move by the Saudi government to broaden the company’s investor base and enhance market liquidity. According to official sources, the government has granted the stabilizing manager an over-allotment option, or “greenshoe option,” to cover short positions resulting from any over-allotments. This option allows the stabilizing manager to purchase up to 10% of the offer shares from the government at the final offer price, exercisable within 30 calendar days after trading commences on the Saudi Exchange (Tadawul), expected on Sunday, June 9, 2024.

The offering will be made to institutional investors in Saudi Arabia, qualified institutional investors outside the Kingdom, and eligible retail investors in Saudi Arabia and other GCC countries. The company plans to hold meetings with participating parties from June 2-6, 2024.

Key Details

The offering structure includes specific timelines and allocations. The order book for institutional subscribers opens at 9:00 am (Riyadh time) on Sunday, June 2, 2024, and closes at 5:00 pm on Thursday, June 6, 2024. The subscription period for individual subscribers runs from 9:00 am on Monday, June 3, 2024, to 5:00 pm on Wednesday, June 5, 2024. The final offering price and allocation will be announced on Friday, June 7, 2024.

If there is sufficient demand, 154.5 million offering shares—10% of the total—will be allocated to individual subscribers, a figure that will not change even if other terms are updated. The offering document is available on Aramco’s website (www.aramco.com/share-offering), ensuring transparency for potential investors.

To ensure the highest level of expertise and professionalism, Aramco has appointed M. Klein and Company and Moelis & Company UK LLP as independent financial advisors. A consortium of leading financial institutions will serve as coordinators and book-runners: Citigroup Saudi Arabia, Goldman Sachs Saudi Arabia, HSBC Saudi Arabia, J.P. Morgan Saudi Arabia Company, Merrill Lynch Saudi Arabia, Merrill Lynch Kingdom of Saudi Arabia, Morgan Stanley Saudi Arabia, and SNB Capital Company. Local book-runners include Al-Rajhi Capital, Riyad Capital, and Capital Saudi Fransi. National Bank Capital Company (SNB) is the lead manager, with The First Saudi Bank (SAB), Alinma Bank, Arab National Bank (ANB), Saudi National Bank, and Al-Rajhi Bank also appointed. Riyad Bank and Banque Saudi Fransi are recipients of the offering, and Merrill Lynch Kingdom of Saudi Arabia serves as the Price Stabilization Manager.

The offering will comply with Regulation S under the US Securities Act 1933, as amended.

Key dates include: the deadline for completing Negotiated Trades (NT) and depositing shares in individual subscribers’ portfolios is before 9:00 am on Sunday, June 9, 2024. Trading of the offering shares on Tadawul is expected to begin after these steps on June 9, 2024. The last date for returning surplus subscription amounts to individual subscribers is Tuesday, June 11, 2024, when cash settlement, refunds, and the completion of the offering and total final offering value will be announced. The price stability period runs from Sunday, June 9, 2024, until Tuesday, July 9, 2024.

Implications and Impact

This secondary offering is set to further integrate Aramco into global financial markets, attracting substantial foreign investment and reinforcing Saudi Arabia’s position as a leading economic power. The involvement of top-tier international banks underscores the confidence in Aramco’s stability and growth prospects. The offering also provides an opportunity for a wider pool of investors, including individuals in Saudi Arabia and the GCC, to participate in the company’s success, promoting broader wealth distribution and financial inclusion.

Analysts suggest that the offering could enhance market liquidity on Tadawul and potentially lead to increased index weightings for Aramco, benefiting the broader Saudi stock market. The government’s commitment to a six-month lock-up period following the closing date demonstrates a long-term perspective and confidence in the company’s value.

Regionally, the offering may stimulate further capital market activity in the GCC, as investors re-evaluate their portfolios and seek to capitalize on the region’s economic diversification efforts. Internationally, it reinforces Saudi Arabia’s role as a reliable energy supplier and a key destination for foreign direct investment.

Vision 2030 Alignment

This offering is a direct reflection of Saudi Arabia’s Vision 2030, which aims to diversify the economy away from oil dependency and enhance the role of the private sector. By broadening Aramco’s shareholder base, the Kingdom is not only raising capital but also fostering a more dynamic and inclusive financial ecosystem. The proceeds from the offering are expected to be reinvested in strategic sectors, supporting the development of new industries, infrastructure, and social programs. As Aramco continues to evolve into a more globally integrated entity, it remains a cornerstone of Saudi Arabia’s economic transformation and a symbol of its forward-looking ambition.

20 Questions

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

A1. The offering comprises 1.545 billion shares, representing approximately 0.64% of the company’s issued shares, with an option to increase to about 0.7% if the over-allotment option is fully exercised.

Q2. When will the offering be launched?

A2. The offering will be launched on Sunday, June 2, 2024, with the order book for institutional subscribers opening at 9:00 am Riyadh time.

Q3. What is the expected price range for the shares?

A3. The price range for the offering shares is expected to be between SAR 26.7 and SAR 29 per share, subject to final determination based on demand.

Q4. Who can participate in the offering?

A4. Institutional investors in Saudi Arabia, qualified institutional investors outside the Kingdom, and eligible retail investors in Saudi Arabia and other GCC countries can participate.

Q5. What is the over-allotment option?

A5. The over-allotment option, or greenshoe option, allows the stabilizing manager to purchase up to 10% of the offer shares from the government to cover short positions, exercisable within 30 days after trading begins.

Q6. When will trading of the offering shares commence on Tadawul?

A6. Trading is expected to begin on Sunday, June 9, 2024, after the completion of negotiated trades and deposit of shares into individual subscribers’ portfolios.

Q7. What is the subscription period for individual investors?

A7. The subscription period for individual investors runs from 9:00 am on Monday, June 3, 2024, to 5:00 pm on Wednesday, June 5, 2024.

Q8. How many shares will be allocated to individual subscribers?

A8. If there is sufficient demand, 154.5 million shares—10% of the total offering—will be allocated to individual subscribers, and this number will not change.

Q9. Who are the financial advisors for the offering?

A9. M. Klein and Company and Moelis & Company UK LLP are appointed as independent financial advisors to ensure the highest level of expertise and professionalism.

Q10. Which banks are acting as coordinators and book-runners?

A10. Citigroup Saudi Arabia, Goldman Sachs Saudi Arabia, HSBC Saudi Arabia, J.P. Morgan Saudi Arabia Company, Merrill Lynch Saudi Arabia, Merrill Lynch Kingdom of Saudi Arabia, Morgan Stanley Saudi Arabia, and SNB Capital Company.

Q11. What are the roles of the local book-runners?

A11. Al-Rajhi Capital, Riyad Capital, and Capital Saudi Fransi are appointed as local book-runners to facilitate the offering within the Kingdom.

Q12. Which entity is the lead manager for the offering?

A12. National Bank Capital Company (SNB) has been appointed as the lead manager for the offering.

Q13. Who is the price stabilization manager?

A13. Merrill Lynch Kingdom of Saudi Arabia has been appointed as the Price Stabilization Manager for the offering.

Q14. What is the timeline for the final offering price announcement?

A14. The final offering price and allocation will be announced on Friday, June 7, 2024.

Q15. When will the proceeds be settled and refunds made?

A15. Cash settlement and refunds of surplus subscription amounts will be announced on Tuesday, June 11, 2024, when the completion of the offering and total final offering value will also be announced.

Q16. What is the lock-up period for the government and the company?

A16. The government and the company are restricted from disposing of shares for six months following the closing date of the offering, expected to be June 11, 2024.

Q17. How does this offering comply with international regulations?

A17. The offering will comply with Regulation S under the US Securities Act 1933, as amended, ensuring adherence to global securities laws.

Q18. Where can investors find the offering document?

A18. The offering document is available on Aramco’s website at www.aramco.com/share-offering.

Q19. What is the price stability period?

A19. The price stability period runs from Sunday, June 9, 2024, until Tuesday, July 9, 2024, during which the stabilizing manager may intervene to stabilize the share price.

Q20. How does this offering align with Saudi Vision 2030?

A20. The offering supports Vision 2030 by broadening Aramco’s investor base, attracting foreign investment, and contributing to economic diversification and the development of Saudi Arabia’s financial markets.

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