Twitter Inc., the microblogging service with more than 100 million users, received a $300 million investment from Saudi Prince Alwaleed bin Talal as it pushes through a redesign of its site to attract advertisers.
Alwaleed, who leads the 2011 Arab Rich List, and his investment company agreed to buy a “strategic stake” in Twitter, Kingdom Holding said today. A strategic holding means more than 3 percent, Ahmed Halawani, a Kingdom Holding director, said in an interview. That would give the San Francisco-based company a valuation exceeding $10 billion.
The investment by Alwaleed, the largest individual investor in Citigroup Inc. (C) and owner of a stake in News Corp. (NWSA), may give Twitter more time to pursue growth before selling shares an initial public offering, a path that’s likely to be pursued by rival Facebook Inc. Twitter, which lets its users send 140- character messages, is revamping the site to make it faster and simpler to navigate.
“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.”
Twitter confirmed the investment in an e-mail, declining to give additional comments.
Demand for technology IPOs reignited in November after a summer lull, setting the stage for Zynga Inc., the largest maker of games for Facebook, Groupon Inc. and Angie’s List Inc. to go public. Facebook may file for an IPO before the end of the year, a person with knowledge of the matter said last month. The sale may value the company at more than $100 billion, twice as high as it was in January, when the company announced a $1.5 billion investment from Goldman Sachs Group Inc. and other backers.
DST Global, the technology fund managed by Russian billionaire Yuri Milner and an investor in Facebook, led an $800 million financing round in Twitter in August. That investment valued the short-messaging service at $8 billion, people with knowledge of the plan said at the time.
“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, which had about $194 billion under management at the end of June. “But the business model in its current form isn’t ready for the public market.”
The investment followed “several months of negotiations,” Kingdom Holding said in a statement. The Riyadh-based company, controlled by Alwaleed, a nephew of Saudi Arabia’s King Abdullah, jumped as much as 8.9 percent and closed 5.1 percent higher at 8.25 riyals in Riyadh.
“The company believes that social networking will change the fundamentals of the media industry,” Halawani said in a telephone interview, adding that Alwaleed and Kingdom Holding bought the shares from founding shareholders. “I expect Twitter does not need further funding before going public.”
In a separate interview with Al Arabiya, Halawani said Twitter will probably hold an IPO in two years.
Twitter is seeking to speed up the rollout of advertising features, its main source of revenue. The microblogging service’s revamp includes tabs at the top of the screen that let users more easily access their home pages, connect with others and discover new content. EMarketer cut its estimate for 2011 ad revenue to $139.5 million from $150 million in September because Twitter has been slow to roll out some services.
Apple, General Motors
Twitter may boost ad revenue by 86 percent next year as it attracts more international advertisers, according to EMarketer.
Evan Williams and Biz Stone, two of Twitter’s co-founders, have lessened their involvement under Chief Executive Officer Dick Costolo, who took the reins in October 2010. Mike Abbott, a vice president in charge of engineering, also has stepped down.
Alwaleed, whose other investments include holdings in Apple Inc. and General Motors Co., was ranked the richest Arab businessman this year by Arabian Business magazine with assets valued at $21.3 billion. Kingdom Holding, 95 percent owned by the prince, is building the tallest tower in the world in Jeddah at a cost of 4.6 billion riyals ($1.2 billion).
Alwaleed “is a savvy investor and the hot thing in the IT world is social networking,” said Nabil Farhat, a partner at Abu Dhabi-based Al Fajer Securities.