Saudi Arabia doubles sovereign fund's stake in Aramco

Saudi Arabia transferred an 8% stake in Aramco to companies owned by the sovereign Public Investment Fund, as the kingdom reorganises its holdings ahead of a potential public offering in the oil giant.

The stake is worth roughly $163.6 billion, according to Aramco’s current market capitalisation, LSEG data shows.

Saudi Arabia is poised to sell more shares in Aramco later this year, sources told Reuters last month, which could boost financing for the kingdom’s ambitious economic reform agenda known as Vision 2030.

PIF declined to comment on which entities the additional shares would be transferred to.
The fund has held a 4% stake in Aramco since 2022 and indirectly holds another 4% that was transferred last year to Sanabil, which it wholly owns.

The transfer “is a continuation of Saudi Arabia’s long-term initiatives to boost and diversify the national economy and expand investment opportunities in line with Saudi Vision 2030,” state news agency SPA said on Thursday, citing Crown Prince Mohammed bin Salman, who is known as MBS and chairs PIF.

“The transfer will also solidify PIF’s strong financial position and credit rating,” SPA added.
PIF has raised $7 billion from two separate debt sales this year, taking advantage of strong investor demand for emerging-market issuers.

Its total debt is estimated at around $36 billion, Global SWF said in a report dated Feb. 29, adding that the sovereign fund was unlikely to halt its borrowing spree.

Aramco’s shares closed at 31.75 riyals ($8.47) on Thursday, slightly below their 2019 IPO price of 32 riyals, giving it a market capitalisation of nearly $2.05 trillion. PIF sits at the centre of the de facto ruler’s ambitious plan to diversify the economy by building so-called giga projects and new industries.

It has catapulted from sleepy sovereign investor into a global investment vehicle making multi-billion dollar bets on everything from technology and sports.

PIF invested $31.5 billion last year to become the world’s top spending sovereign wealth fund. It had roughly $700 billion in assets under management before the new transfer and aims to grow that to $2 trillion by 2030.

“This is a private transfer and the Company is not a party to the transfer and did not enter into any agreements or pay or receive any proceeds from the transfer,” Aramco said in a filing on the Saudi Exchange.

“The transfer will not affect the Company’s total number of issued shares, and the shares transferred will rank equally alongside other existing ordinary shares in the Company,” it said, adding it would have no impact on its operations, strategy, dividend policy or governance framework.

The state holds 82.186% of Aramco following the transfer, Aramco said.

The Saudi government is heavily reliant on Aramco’s generous payouts, including royalties, a base dividend and an additional performance-linked dividend introduced last year.

The state has infused huge amounts of cash into PIF, including a $40 billion transfer in 2020, as it spends exorbitant amounts in an effort to overhaul the economy and cut reliance on oil revenue.

Among its dizzying list of endeavours is NEOM, the planned futuristic city in the desert that is set to host the 2029 Asian Winter Games. MBS said in July 2022 that NEOM would publicly list this year and that its first phase alone would cost about $320 billion.