Saudi Arabia has transferred 4 percent of shares of the state-owned oil giant, Saudi Aramco to the Kingdom’s sovereign wealth fund, Public Investment Fund (PIF) to support the restructuring of the economy.
The transfer of stake worth about $80 billion is also in line with PIF’s plans to raise its assets under management to $1.07 trillion by 2025.
The state remains the largest shareholder in Saudi Aramco after the transfer as it still owns more than 94 percent of the company’s shares, reports stated, citing Saudi Arabia’s Crown Prince Mohammad bin Salman who is also chairman of PIF.
The transfer of Saudi Aramco’s shares into PIF, which currently has about $480 billion in assets under management, will help bolster the fund’s strong financial position and its high credit rating in the medium term.
According to sources, last week Saudi Arabia held talks with advisers on a potential second offering of Aramco stock, which could bring in more than its initial IPO. Aramco’s 2019 IPO, in which it sold about 2 percent of its stock on the Riyadh bourse, raised almost $30 billion.
The money was transferred to the sovereign wealth fund and was meant to support investments to shift the biggest Arab economy away from a reliance on oil sales.
The soaring price of oil as the global economy reopens after the impact of the pandemic has helped lift Aramco’s share price from a low of $7.41 in March 2020 to $9.94, giving it a market capitalization of almost $2 trillion.
Aramco is the world’s biggest oil company and is helping finance Prince Mohammed’s plan to transform and diversify the Saudi economy, an initiative dubbed Vision 2030.
The sovereign wealth fund is a central plank of Saudi Arabia’s Vision 2030 plan that seeks to diversify the Arab world’s largest economy and reduce its reliance on oil. PIF has outlined a plan to grow its assets under management to about $1.07 trillion by 2025 while investing $40 billion annually into Saudi Arabia’s economy. The wealth fund is a key lever for the kingdom’s efforts to revive growth after a recession caused by the coronavirus pandemic and lower oil prices.