Tuesday, December 20, 2011

Saudi Prince Bets $300 Million on Twitter's Future

One of the most powerful men in the Middle East is betting $300 million that Twitter will become a multibillion-dollar company, buying a stake estimated to be worth 3 percent to 4 percent of the social "microblogging" network Relevant Products/Services's value.

Prince Alwaleed bin Talal, nephew of Saudi King Abdullah bin Abdul Aziz, is estimated to be worth more than $31 billion, making him No. 26 on the Forbes magazine list of the worlds richest people. He has a history of business Relevant Products/Services deals with high-tech and media companies, including AOL, Apple, MCI and Motorola. He has a major investment in Rupert Murdoch's News Corp., and the Australian mogul in 2009 bought a stake in bin Talal's Rotana media conglomerate.

Vote of Confidence

But the investment in Twitter is noteworthy because it comes ahead of any public offering of Twitter stock, showing a vote of confidence in the 5-year-old company's potential. And analysts also note that Twitter played a major role in fueling the protests of the Arab Spring that led to the downfall of Egypt's Hosni Mubarak and has fueled opposition elsewhere, including Saudi Arabia.

The $300 million comes both from bin Talal personally and his Kingdom Holding Co., the largest company in Saudi Arabia, which he controls. "Our investment in Twitter reaffirms our ability in identifying suitable opportunities to invest in promising, high-growth businesses with a global impact," the prince said in a statement.

The prince's wife, Princess Ameerah al-Taweel, using her own Twitter account, refuted the idea that the investment was political, Forbes reported.

"It's simply good business sense, particularly since bin Talal has a history of buying into technology and media companies," said Charles King, principal analyst at Pund-IT Relevant Products/Services. "According to news reports, Talal's shares were purchased from Twitter insiders, which suggests they were comfortable with the idea of his investment."

"Given the rocky reception Zynga's IPO received last week, this could suggest that Twitter is backing away from its own public offering until things settle down a bit."

Tough Call for Investors

Zynga, the online game and application developer, priced its initial offering at $10 but quickly fell below that amount. That contrasts with more successful recent debuts by professional network LinkedIn and e-coupon giant Groupon, making investors' reception of Internet-based companies difficult to predict.

Twitter, however, is seen as a promising bet, having grown to 300 million users sending 140-character updates since it was founded in 2006 by Jack Dorsey and three partners. It has since attracted millions in venture capital.

Prince bin Talal made news in the United States following the terror attacks on 9-11, when he donated $10 million to a New York City disaster relief fund.

But that donation was later returned by then-Mayor Rudolph Giuliani after the prince said in a statement that the United States "must address some of the issues that led to such a criminal attack" and "re-examine its policies in the Middle East and adopt a more balanced stand toward the Palestinian cause." The mayor took those statements as a kind of justification for the attacks, which killed nearly 3,000 people.

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