The Saudi decision to transfer 4% of Saudi Aramco shares worth $80 billion to the kingdom’s Public Investment Fund (PIF) is designed to shore up the sovereign wealth fund and to transform the Saudi economy and diversify away from oil revenues.
According to Saudi Crown Prince Mohammed Bin Salman the transfer of these shares is part of the kingdom’s long-term goal to promote the restructuring of the national economy in accordance with Vision 2030.
“The transfer of shares helps to the fund’s goals to increase the amount of its assets under management to around $1.7 trillion by the end of 2025,” he added.
“The fund continues to achieve its strategy by maximizing assets, introducing new industries, developing strategic economic relationships, and localizing technology and knowledge,” he continued.
He claimed that “the Saudi sovereign fund wants to invest around $270 billion into new projects locally by the end of 2025, in addition to creating more direct and indirect jobs in the local labor market.”
The transfer of Aramco’s shares to PIF will help to enhance its position and good credit rating in the medium term.
Aramco, for its part, confirmed that the transfer of shares is a private process between the government and the fund, in which the company is not a party, and for which the company does not entail any payments or returns because of the transfer process.
According to Aramco, the transfer process will not affect the company’s business, strategy, profit-sharing policies, or governance system.
According to Bin Salman, the government remains the largest shareholder in Aramco, even after the transfer of shares, as it holds more than 94 percent of its total shares.
Assets in the fund have increased by 16%.
The value of the PIF’s assets will increase by more than 16 percent under the new agreement, reaching $560 billion.
According to Bloomberg, the number of shares transferred to the fund under the arrangement is around 8 billion shares, with an estimated market value of approximately $79.5 billion, based on the last closing price of Aramco’s share, which is roughly $10, on the Saudi stock exchange “Tadawul.”
This indicates that the Public Investment Fund’s assets increased by more than 16% to $560 billion.
According to the most recent data from the Sovereign Wealth Fund Institute (SWF), the PIF’s assets are estimated to be over $480 billion, while Aramco’s market value is close to $2 trillion.
Bloomberg Agency reported in January 2022 that the Saudi Public Investment Fund would increase its stake in companies listed on international stock exchanges, citing unnamed sources.
According to the sources, the fund’s spending on global equities will be an addition to its direct investments in international companies and its regional agreements.
Seventh Place
According to the current SWF Institute classification, the Saudi wealth fund is rated seventh among the world’s most significant sovereign wealth funds.
The fund has holdings in 19 firms, the most significant of which are STC Telecom (26.3 percent) and SNB (18.4 percent) in the Saudi market.
Globally, the Saudi Public Investment Fund nearly tripled its holdings of US-listed shares to $43.45 billion in the third quarter of 2021, adding shares of the “Ali Baba” group, “Walmart,” and “Pinterest,” as well as shares in Pinterest.
In addition to the above, the PIF owns a 62.72 percent ownership in Lucid, an electric car business with a market value of over $71 billion.