Saudi Arabia has transferred 4% of the stock in the state-run oil giant Saudi Aramco to the country’s sovereign wealth fund, the government said on Sunday.
The announcement on the state-run Saudi Press Agency comes as the oil firm is valued at just under $2 trillion and as oil trades above $90 a barrel – its highest level since 2014, as the kingdom tries to overhaul its energy-dependent economy.
Saudi Crown Prince Mohammed bin Salman (MBS) made the decision to transfer the stock, the state media report said.
The infusion valued at nearly $80 billion 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 has been the prince’s vehicle to transform the Saudi economy and diversify away from oil revenues. It has invested in everything from Uber to British soccer team Newcastle United and is also part of the prince’s Neom project along the Red Sea coast.
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.
"His Highness added that the transfer of these shares is part of the kingdom’s long-term strategy aimed at supporting the restructuring of the national economy," the report said. That will include creating private-sector jobs in the kingdom, 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," said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
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 head of the 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 billion.
The Public Investment Fund also has invested in the electric car manufacturer Lucid Motors Inc. of Newark, California.
The fund did not immediately acknowledge what its plans for the stock would be. Ratings agency Moody’s Investors Service last week said the fund’s assets had grown to $412 billion in 2020, up from $152 billion in 2015.
Aramco, the world's biggest oil company, completed the world's largest initial public offering (IPO) 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 Inc and Microsoft Corp.
After a sharp fall in energy prices in the early days of the pandemic, demand for oil is nearing pre-COVID-19 levels with Brent crude trading around $94 a barrel amid concerns over tight global supplies.
Saudi Arabia has reaped the benefits of a spike in oil prices after the pandemic crashed prices at one point into negative territory, but it also sees the growing worldwide concern over climate change being fueled by burning fossil fuels.
MBS's plans hope to see that oil wealth pay to create jobs for the kingdom's youth to pivot away from oil over time.