Foreign investors have flocked to Saudi Aramco’s $12 billion share sale, mostly attracted by the dividends, sources who did not wish to be identified, told Bloomberg.
Those investors put in enough bids to more than fully cover the offering, the sources said.
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This is a completely opposite situation from the oil giant’s 2019 IPO (Initial public offering) that ended up as a largely local affair, as investors weren’t happy with the valuation expectations, Bloomberg reported. The IPO eventually drew orders worth $106 billion, and about 23% of shares were allocated to foreign buyers back then.
Apart from Western institutions, demand for the offer was also strong among Asian investors, one of the sources told Bloomberg, signaling the kingdom’s growing ties with larger Asian economies like China and India. Local interest has also been strong.
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Aramco’s huge dividend, coupled with a massive investment plan in renewable power, petrochemicals, gas and the opportunity to buy the stock at a discount, have drawn in investors, according to the report.
Investors willing to look past a steep valuation and the lack of buybacks would cash in on a $124 billion annual payout that Bloomberg Intelligence estimates will give the company a dividend yield of 6.6%.
The Saudi government currently owns about 82% of Aramco, while the Public Investment Fund holds a further 16% stake. The kingdom will continue to be the main shareholder after the offering, which adds to Riyadh’s efforts to raise cash and fill a budget deficit.
