Saudi Aramco to put more shares on sale in the coming years
Saudi Arabia's Crown Prince Mohammed Bin Salman has announced that a second listing of Saudi Aramco "could happen" in the coming years as part of his plans to raise funds for the FIP. The Saudi authorities are considering issuing an additional package of shares in the state-owned oil company in order to finance the sovereign wealth fund.
Saudi Arabia's de facto leader expressed the Kingdom's intentions during a conversation with former Italian Prime Minister Matteo Renzi at the fourth virtual edition of the Future Investment Initiative (FII) forum.
Saudi Arabia is hosting this year's event to attract investors to the kingdom, two weeks after announcing its $6 trillion investment blueprint for the next decade. The FII aims to review the state of the global economy and is known as the "Davos of the desert".
"This [the issuance of more shares] will produce a cash flow transferred to PIF to be reinvested domestically and internationally, and thus benefit Saudi citizens," Bin Salman stressed.
The crown prince did not elaborate on this, but added during the session that the Kingdom's plans include "major privatisation projects" as well as a "natural increase" in the Investment Fund's profits. According to Bin Salman, these profits will be reinvested and will help the fund grow from $400 billion to $1.1 billion over the next five years.
The PIF is the Kingdom's sovereign wealth fund, directed by Bin Salman himself, which manages assets of approximately $360 billion and aims to lead the country's economic projects. The Saudi authorities left a significant part of its financing in the hands of foreign investors, which they are now trying to attract.
The aim by then is to reduce dependence on black gold to a minimum. The government's 'vision 2030' plan aims to diversify the economy and find a secure alternative that maintains the state's aspirations.
Saudi Aramco remains the most valuable oil company in the Middle East and the most important avenue for extracting funds for the FIP. However, falling demand and oil prices over the past 2020s have brought with them a sharp drop in revenues that is obstructing MBS's plans.
Saudi Aramco was partially privatised more than a year ago. Its IPO reaped the most successful initial public offering (IPO) in history, with the company then generating around $29.5 billion.
Since becoming heir to the crown in 2017, Bin Salman has prioritised economic diversification, however, it was the COVID-19 crisis that forced the Kingdom to find a solution sooner rather than later.
The aim at the time was to channel cash to the state by raising funds through the IPO. However, an analysis of the results one year later shows that the operation was not enough. For this reason, the House of Saud is doubling down and putting more shares up for sale.
According to Bloomberg, the state-owned oil company has omitted data in its reporting on emissions generated by several of its refineries and petrochemical plants. If all its activities were included, Saudi Aramco could even double its self-reported carbon footprint.
Experts point out that this omission is intended to restrain investors, on whom the Kingdom depends. Moreover, there is a possibility that the company could be sued for these practices.
Beyond the terrorist threat to Saudi Aramco - previously attacked - shareholders fear the Kingdom's action on the oil company. Many point out that the Saudi authorities are spending funds on objectives outside the company's immediate commercial plans.
Saudi Aramco's commercial imperatives may clash with its domestic obligations, which include facilitating Saudi Arabia's role as a hegemonic power in the region and an alternative OPEC producer. These two sides are incompatible in order to fully capitalise on its value.
