Saudi prince makes a $300 million bet on Twitter

The investment may help alleviate investors' anxiety about the large exodus of top executives from the company.

By Jonathan Berr Dec 19, 2011 1:53PM
Saudi investor Prince Alwaleed bin Talal is investing $300 million in Twitter, adding the microblogging site to his stable of high-profile investments, including Citigroup (C) and Apple (AAPL).

The investment, which values the investment at about $8.4 billion, comes as Twitter is redesigning its wildly popular website to attract more users and advertisers before it goes public. Prince Alaweed made the investment with his Kingdom Holdings business. His holdings in Twitter, which came from insiders, equal a 3.6% stake in the company.

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"Our investment in Twitter reaffirms our ability in identifying suitable opportunities to invest in promising, high-growth businesses with a global impact," he said in a press release.

The investment may help alleviate investors' anxiety about the large exodus of top executives from Twitter. Co-founder Biz Stone resigned earlier this year. Another co-founder, Evan Williams, resigned as CEO last year. Jack Dorsey, also a founder, is Twitter's executive chairman. He was ousted as CEO in 2008 and returned to the company this year. The reasons for the changes are many.

"Company insiders say the old guard is being wiped out by Twitter's new leadership team," according to CNN/Money. "They also say that's probably a good move. Struggling and stagnating, Twitter needed to have a bolt of lightening shot through it, according to those with a close-up view of the company's transition."

Twitter's popularity is surging. The San Francisco company now has 2,400 advertisers running campaigns on the site, up from 1,600 earlier this year. The site has about 100 million active users.

Alaweed's investment has an ironic quality. Twitter's role in the Arab Spring was widely praised. The Saudi royal family announced a $30 billion social spending program in response to the upheaval. Freedom of speech, which benefits Twitter, is restricted in Saudi Arabia. In fact, activists are concerned about restrictions on expression instituted earlier this year.

How profitable Twitter is, with about 800 employees, is unclear. There were media reports in 2009 that it reached profitability ahead of schedule. Twitter probably had difficulty staying in the black as it ramps up its service to keep up with surging demand. EMarketer recently slashed its forecast for Twitter's 2011 ad revenue to $139.5 million from $150 million because Twitter has been slow to roll out some services, according to Bloomberg News. Facebook, on the other hand, supposedly earned $714 million in profit in the first three quarters of the year.

The timing of the Alaweed investment comes as investors are becoming more skeptical about Internet IPOs. Last week, Zynga's (ZYNGA) much-hyped public offering, the largest since Google's (GOOG), flopped in its debut. LinkedIn (LNKD), the professional social-networking site, is down more than 30% this year, and Groupon (GRPN), a coupon site, is down 12%.

Alaweed certainly knows the media landscape. He is a huge investor in News Corp (NWS) and Time Warner (TWX) and may be able to help Twitter expand further overseas. The prince, whose fortune is estimated by Forbes magazine at $19 billion, plans to start a cable news TV channel.

Jonathan Berr does not own shares of any companies listed here.
Dec 19, 2011 11:58PM
this is where our foreign aid goes, way to go democrats
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