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Aramco could pull the trigger this month on what would again be one of the world’s largest-ever share sales as the oil giant looks to revive plans to sell shares in a secondary offering, Bloomberg reports.
The details: Bankers working on the potential transaction are reportedly looking to raise at least SAR 40 bn (USD 10 bn) in proceeds from the potential follow-on offering on the local exchange, the business information service reports, citing unnamed sources it says are familiar with the matter.
What we don’t know: The size of the stake it intends to float, a timeline for the potential transaction, who’s advising, whether the sale will be open to retail investors…
Our math: Aramco would have to float 1.3 bn shares (or a bit more than 0.5% of the company) to raise SAR 40 bn at yesterday’s closing share price. Aramco shares closed the day down 2.2% at SAR 30.60 yesterday.
BACKGROUND- The idea of selling more shares first surfaced in 2021, when CrownPrince and Prime Minister Mohammed bin Salman said the government would sell more shares in the oil giant, with proceeds earmarked for the Public Investment Fund. Aramco raised USD 29.4 bn on Tadawul in 2019 in what remains the biggest IPO in history.
Uh, Enterprise? What’s a “secondary offering”? A primary offering of shares is when a company’s shareholders agree to create new shares and sell them. In that case, the proceeds from the sale go to the company to use as it sees fit — usually for growth. A secondary sale is when one or more existing shareholders decide to sell shares they already hold. In that case, cash proceeds usually go into the selling shareholder’s pocket unless they agree specifically to reinject a portion of the capital into the company.
The 2019 IPO in a nutshell: The world’s largest oil company floated a 1.5% stake for a top of the range price of SAR 32 a piece on Tadawul in December 2019, raising USD 25.6 bn before exercising its “greenshoe option” for an over-allotment of shares that earned the company USD 29.4 bn in total proceeds in January 2020. The transaction valued the company atUSD 1.87 tn, after selling a total of 3.45 bn shares.
KPIs for 3Q 2023: The oil giant’s bottom line rose 27.5% y-o-y to SAR 354.5 bn in 9M 2023, and 23% y-o-y to SAR 122.2 bn in 3Q 2023, according to the company’s latest earnings release (pdf). The company has also earmarked SAR 73.2 bn to base dividends payouts in 3Q 2023.
Ownership structure: The government is currently majority shareholder and the only substantial shareholder of the oil giant with a 90.2% stake, while 1.5% is floated on the market and the remaining shares are held by non-substantial holders (those who own less than 5% each). Foreign shareholders have in their hands just 0.4% of the company’s shares.
