Saudi Crown Prince Mohammed bin Salman speaks during the Gulf Summit in Riyadh, Saudi Arabia, December 14, 2021.
Bandar Saudi Press Agency | Handout | via Reuters
Saudi Arabia’s Crown Prince Mohammed bin Salman has transferred 4% of Saudi Aramco shares worth $80 billion to the kingdom’s sovereign wealth fund, the government said on Sunday.
The shares will bolster the Public Investment Fund’s (PIF) strong financial position and high credit ratings in the medium term, the crown prince said in a statement. The fund is the prince’s vehicle of choice to transform the Saudi economy and diversify away from oil revenues.
The state remains the largest shareholder in Saudi Aramco after the transfer process, as it retains more than 94% of the company’s shares, the statement said.
The transfer of existing shares would help to boost PIF’s assets under management, which are targeted to grow to about 4 trillion riyals ($1.07 trillion) by the end of 2025, it added.
“It supports the outlook for the PIF raising funds internationally, including bonds, and could potentially support a future Aramco share sale going forward,” Monica Malik, chief economist at Abu Dhabi Commercial Bank, said.
Saudi Aramco said in a statement the transfer was a private transaction between the government and the state fund. “The company is not a party to the transfer and did not enter into any agreements or pay or receive any proceeds from that transfer,” it said.
It said the move would not affect the number of issued shares nor the company’s operations, strategy, dividends distribution policy or governance framework.
It added that the shares transferred would rank equally among other existing ordinary shares.
Saudi officials had previously raised the possibility of Aramco share sales. The PIF did not comment.
The head of the sovereign wealth fund, Yasir al-Rumayyan, said last year that Saudi Aramco may consider selling more shares if market conditions are right, while the Wall Street Journal recently reported that the kingdom could target a stake sale of as much as $50 trillion.
“The PIF is Saudi Arabia’s main vehicle to execute its 2030 vision, which suggests that this share transfer could imply further share sales down the line as a way to raise funds for the PIF to be reinvested elsewhere,” Yousef Husseini, associate director at EFG Hermes, said.
Aramco, the world’s biggest oil company, completed the world’s largest initial public offering in late 2019, raising $29.4 billion, with the proceeds transferred to the PIF.
Aramco’s shares are up just over 4% so far this year, valuing the company at $1.99 trillion, behind the world’s most valuable company, Apple and Microsoft. The shares declined 0.7% to 37.05 riyals at the close on Sunday.
After a sharp fall in energy prices in the early days of the pandemic, demand for oil is nearing pre-Covid levels with Brent crude trading around $94 a barrel amid concerns over tight global supplies.