Saudi billionaire Prince Alwaleed bin Talal announced today that he's purchased an approximately 3-percent stake in social media site Twitter for $300 million. Alwaleed is one of the wealthiest men in the world and his interest in Twitter could mean even bigger things for the site in the future. In August, Twitter raised $800 million from private investors and was valued at $8.4 billion. Alwaleed's stake could value the company at more than $10 billion now.
The "Arabian Warren Buffett"
The stake in Twitter represents a relatively small portion of Alwaleed's reportedly $20 billion plus fortune. The Saudi Prince owns 95 percent of Kingdom Holding Co., which made the press release announcing the deal, which San Francisco-based Twitter later confirmed. “We believe that social media will fundamentally change the media industry landscape in the coming years. Twitter will capture and monetize this positive trend,” Ahmed Reda Halawani, Kingdom Holding’s executive director of private equity and international investments, stated.
Alwaleed also has very public stakes in Citigroup (C), Apple (AAPL), General Motors (GM), and News Corp (NWSA). Prince Alwaleed began his business career after graduating from Menlo College in California, buying a stake in Citigroup at a time when the firm was troubled. The bailout was a success for Alwaleed and prompted Time to nickname him the "Arabian Warren Buffett."
Twitter Looking for New Path Forward
Alwaleed comes to Twitter while the company is trying to create a new business model to generate higher revenue and profits. Alwaleed could see a chance to get in early on a company that he sees as having strong potential for profitability in the future at a time when questions about management are driving down the cost of his investment. "Our investment in Twitter reaffirms our ability in identifying suitable opportunities to invest in promising, high-growth businesses with a global impact," said Alwaleed. Twitter, though, has been taking a different approach to raising funds for expansion than other tech and social media companies. While the IPOs of group-discount site Groupon (GRPN) and online gaming company Zynga (ZNGA) and the pending Facebook IPO next year have been big news, Twitter has been slower to seek public investors.
Twitter doesn't appear poised to go public any time soon. “Twitter is seen as a strategic asset within the social media space, given its large user base,” said Jack Neele, a fund manager at Robeco Groep NV. “But the business model in its current form isn't ready for the public market.” Twitter's strategy may be to continue expanding its brand and influence, waiting until the right moment to offer shares to the public.
“They are looking to give themselves some more running space,” said Jeff Mann, an analyst at Gartner in Amsterdam. “Their strategy has always been first get big. They're still holding reasonably close to that. Having a big audience is more important than a short-term revenue stream.”