Billionaire investor Prince Alwaleed values Twitter at $15bn but doubts from the market remain
Monday 16 September 2013
Billionaire investor Alwaleed bin Talal has given a public vote of confidence in microblogging site Twitter’s upcoming IPO, stating that he does not intend to sell any of his shares in the site when it hits the market.
Prince Alwaleed, the nephew of Saudi Arabia's King Abdullah, invested $300 million in the social media giant in late 2011. His investment company Kingdom Holding is closely watched by the international markets following its successful investments in companies such as Citigroup and News Corp.
"Twitter is a very strategic investment for us,” said Alwaleed in a telephone interview with Reuters. “We believe that it is just beginning to touch the surface. We have invested $300 million in the company. We will be selling zero, nothing, at the IPO."
Twitter announced that it had filed for an initial public offer of shares by tweet on Thursday, with the market expecting that once listed the company will be valued at more than $10 billion. Alwaleed, however, expects that even this is a conservative estimate:
"We hear that the company is valued at $14 billion-$15 billion but there have been trades above this valuation. We believe it might be worth more than that,” said the Prince. "With the 300 million customers they have and half a billion tweets a day, the growth potential is tremendous.”
The hype surrounding the IPO has invited comparisons with Facebook, whose 2012 stock market debut was subject to an inflated valuation that quickly crashed. The company’s share price slowly recovered due to mobile advertising revenue and last week hit a record high of $45.
Alwaleed seems to have taken these comparisons on board, saying: "In my discussion with Mr Costolo [Twitter’s CEO] and the management of Twitter, I cautioned them to be very careful and not to repeat the mistakes of Facebook. […] The lessons are not to brag too much, don't be greedy - I mean price it right and be realistic."
However, there are already rumbles of complaint surrounding Twitter’s decision to file its IPO confidentially. Usually companies have to publish hundreds of pages of documents clearly outlining their financial situation and potential risks months before an IPO so that investors and journalists can analyse their valuation.
Instead, the microblogging site took advantage of America’s Jumpstart Our Business Startups (JOBS) Act, a piece of legislation that means the site can withhold this information until 21 days before its ‘roadshow’ to investors, an event that can come just days before the shares go on sale.
The Financial Times summarised much of the worry surrounding the IPO with the headline “Twitter’s short and simple tweet fails to answer key questions”.
Other analysts are worried less about the company obscuring financial shortcomings and more about the threat to the quality of the service it provides. Writing for Wired, Marcus Wohlsen notes that after the IPO Twitter will be beholden to shareholders demanding a return on their investment, causing the company to introduce more adverts to boost revenue:
“More ads on Twitter means more money for Twitter, which makes shareholders happy. But more ads on Twitter will make users less happy, which means fewer users. Fewer users mean lower ad rates, which makes shareholders unhappy — a vicious cycle,” says Wohlsen.
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