Saudi giant rises strongly.. Expectations of raising $11.2 billion and 60% for foreigners

Shares of Saudi Aramco (TADAWUL:2222) rose on Sunday after a share sale that is expected to raise about $11.2 billion for the state oil company.

Aramco shares rose 1.06% to SAR 28.6 per share at the end of trading, above the offer price of SAR 27.25. Pricing was at the lower end of the initial range of SAR 26.70-29.

There appears to have been no shortage of demand for the secondary offering, which was announced on May 30. Demand for the offering topped $65 billion, according to sources cited by Reuters, and Aramco has earmarked more than half of the sale to foreign investors. CNBC could not verify this report.

This comes at a time when Saudi Arabia continues to move forward with its ambitious plans to diversify its economy away from oil under the Vision 2030 program led by Crown Prince Mohammed bin Salman.

However, the plan — which includes a series of mega-projects — comes with a hefty price tag, with the crown jewel, the futuristic city of Neom, expected to cost around $500 billion alone.

Meanwhile, oil remains volatile, with prices falling for a third straight week as the outlook for demand remains uncertain, and investors have changed their expectations for a rate cut by the US Federal Reserve after the labor market data and reduced their chances of a rate cut at the July meeting.

60% of Aramco's offering to foreign investors

About 60% of the shares on offer in Saudi Aramco’s $11.2 billion sale have been allocated to foreign investors, according to people familiar with the matter, marking a major shift from the company’s 2019 initial public offering that was largely domestic.

The offering generated strong demand from the United States and Europe, according to the people, who asked not to be identified because the information is private. Funds from the United Kingdom, Hong Kong and Japan also backed the share sale, which attracted more than $65 billion in orders.

During the company’s IPO, the expected valuations had put off foreign investors, leaving the government to rely on domestic buyers. The $29.4 billion IPO generated $106 billion in orders, with only 23% of the shares allocated to foreign buyers.

Aramco shares initially fell as much as 1.4% in Riyadh on Sunday, the first day of trading after the secondary offering was completed, before recovering all losses and closing up about 1% in today's trading.

The Saudi government owns about 82% of Aramco, while the Public Investment Fund owns an additional 16%. The kingdom will continue to be the major shareholder after the offer.