Savvy Middle East investor makes strategic investment in Twitter

By Xavier Forneris

More data on the front of valuation of social media companies, but this time for a private company: Twitter Inc., the microblogging service. It was reported earlier today (Dec. 19, 2011) that Saudi Prince Alwaleed bin Talal made a $300M investment in Twitter through his investment company, Kingdom Holding (95 percent owned by the prince).

The strategic investment was a secondary market transaction meaning that shares were purchased directly from existing shareholders/founders. Prince Alwaleed’s stake is estimated to be between 3% and 4%.

Several media have noted the irony of an investment by a Saudi prince in a social-media site that has served as an outlet for uprisings and dissidence in the Arab world.

I was interested in that aspect but also in the opportunity this gave to get a new valuation for Twitter. The investment gives Twitter a valuation exceeding $10 billion. Last August an $800M financing round led by DST Global valued Twitter at $8 billion.

Not bad for a company that has earned only about $45M revenue in 2010 and is forecast to earn about $150M in 2011 and $250M in 2012, according to an eMarketer article.

This type of “rich valuation” –for Twitter today and for the other social media and internet companies I have discussed in previous posts over the past two weeks- is precisely what leaves many analysts wondering whether a new “tech bubble” is in the cards.

And since Twitter is still a private company, little is known about its actual financials and its “market value” will be revealed once it goes public.

The initial public offering (IPO) is not expected before a year, maybe two. In the meantime, the investment gives Twitter time to pursue growth before going public.

Prince Alwaleed bin Talal is the richest Arab businessman and has holdings in Apple, News Corp, Citigroup, and General Motors. Reuters quoted him as saying:

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

Twitter now has over 100 million active users who log onto the service at least once a month. A potential threat, which could take users away from Twitter, was the recent introduction of Google+, the social network service of Google.

Oh, one more thing: I tried but failed to say all this is less than 140 characters…Sorry.

Source / Read more:

Saudi Prince Alwaleed buys Twitter stake, Reuters US Edition, 19 Dec. 2011.

http://www.reuters.com/article/2011/12/19/us-twitter-alwaleed-idUSTRE7BI0EF20111219

Twitter’s Fit for a Prince, Wall Street Journal, online edition dated 20 Dec. 2011:

http://online.wsj.com/article/SB10001424052970204791104577107733831343976.html

Twitter Ad Revenues to Soar This Year, eMarketer Digital Intelligence, 24 January 2011:

http://www.emarketer.com/Article.aspx?R=1008192

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