Saudis expected to cede around 60% of Aramco supply to foreigners

(Bloomberg) — Foreign investors were allocated about 60% of the shares on offer in Saudi Aramco’s $11.2 billion stock sale, people familiar with the matter said, marking a turnaround from to the oil giant’s listing in 2019 which turned out to be a largely local affair.

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The deal has generated strong demand in the United States and Europe, according to the sources, who declined to be identified because the information is confidential. Funds from the United Kingdom, Hong Kong and Japan also supported the stock sale that generated orders worth a total of more than $65 billion, the sources said.

When the oil giant went public, foreign investors largely balked at valuation expectations and left the government dependent on local buyers. The $29.4 billion IPO generated orders worth $106 billion, and only 23% of shares were allocated to foreign buyers.

Aramco shares initially fell as much as 1.4% in Riyadh on Sunday, the first day of trading after the secondary offering closed, before retracing all losses and climbing around 2%.

The secondary offering attracted around 450 funds and more than 125 new international investors, according to people familiar with the matter.

Aramco confirmed that a majority of shares were allocated to foreign funds. International institutional investors now own around 0.73% of the company, it said in a statement on Sunday.

One of the biggest strengths this time around is the company’s dividend, which is one of the largest in the world. Investors willing to look past a high valuation and lack of buybacks could bank a $124 billion annual payout that Bloomberg Intelligence estimates would give the company a 6.6% yield.

Saudi Arabia attracted enough bids to cover all stocks within hours of trading. The offering closed Thursday and the kingdom is expected to bring in at least $11.2 billion in proceeds, excluding excess allocations — cash that will help fund a multibillion-dollar initiative to transform the economy.

The final price was in the lower half of a proposed range of 26.70 riyals to 29 riyals, although Aramco’s stock has been trading below the high range since the deal was announced and has been closed at 28.30 riyals on Thursday.

The scale of foreign participation has been closely watched, with Aramco’s top executives holding a series of events in London and the United States to boost demand.

The Saudi government owns about 82% of Aramco, while the Public Investment Fund owns another 16%. The kingdom will remain the main shareholder after the offer.

(Updated stock price in fourth paragraph)

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