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Will Saudi Prince's $300 Million Twitter Stake Forestall a Riyadh Spring?

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TWITTER FEVER
DailyFeed
When Saudi Prince Alwaleed bin Talal, one of the richest men in the world, announced today that he had invested $300 million in Twitter, the first thought of many must have been that this was a preemptive move by the billionaire to forestall any Arab Spring-like uprising in Saudi Arabia, one of the most repressive countries globally.
 
However, Prince Alwaleed’s acquisition, handled by his investment company Kingdom Holding, does not appear to be driven by political motivations. Known as the Warren Buffett of the Middle East, the Western-educated Alwaleed, whose net worth is estimated at about $20 billion, has substantial stakes in News Corp (NWS), Time Warner (TWX), Citigroup (C), General Motors (GM) and Apple (AAPL). Given Twitter’s strong growth, the prince’s investment is likely to be about making money more than anything else.
 
As Boingboing argues:

• The Saudis don't need to own Twitter to block it. The county established one of the world's most draconian internet censorship regimes and can impose silence as it pleases. All international Internet traffic is routed through a single proxy farm and the government regularly blocks major western sites and services.

• The stake isn't likely to give Alwaleed significant influence over Twitter's operations. Though it's not clear how much of Twitter he owns, the stake is surely less than 5 percent, based on recent valuations. Machinations would soon be leaked to reporters. Blocks would be obvious as soon as they were implemented. In any case, Twitter (and with it the value of Alwaleed's stake) could be ruined if it is seen to be controlled by foreign tyrants.

However, in the unlikely situation of a Twitter-led uprising in the Middle Eastern kingdom, then, as Time notes, leaders at Twitter will face a conundrum: “After all, they have a duty to act in the best interests of their shareholders, including, now, Prince Alwaleed. But those interests may not dovetail with the interests of Twitter’s users, to put it mildly.”

According to Fortune, Alwaleed’s shares were bought from insiders, not the San Francisco company. This means that although the deal had to be approved by Twitter, none of the $300 million will go to the fast-rising tech company.

Twitter has raised more than $750 million in direct venture capital thus far, including contributions from Spark Capital, Union Square Ventures, Kleiner Perkins, Benchmark Capital, Institutional Venture Partners, T. Rowe Price and DST Group, but it is not known whether one of these firms - or a former or current Twitter employee – was the one to sell shares to Alwaleed.
POSITION:  No positions in stocks mentioned.

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