Home | BUSI-MESS | Citigroup, Twitter may fall as holdings of detained billionaire Saudi prince are scrutinized

Citigroup, Twitter may fall as holdings of detained billionaire Saudi prince are scrutinized

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Citigroup, Twitter, Twenty-First Century Fox, and JD.com were among the public company investments confirmed by Prince Alwaleed last month to CNBC.

Citigroup and Twitter shares could be unlikely casualties of a stunning power struggle unfolding in Saudi Arabia right now — at least temporarily.

Prince Alwaleed Bin Talal, one of the world's richest men and a well-known investor who just appeared on CNBC last month, was one of the 11 princes detained in a supposed anti-corruption sweep over the weekend in Saudi Arabia. Alwaleed has not yet been charged, but is suspected of money laundering, according to the Wall Street Journal. His arrest may be less about corruption and more about Crown Prince Mohammad Bin Salman — the 32-year-old heir apparent to the throne — consolidating power.

Alwaleed runs Kingdom Holding Company, shares of which plunged in trading on the Saudi stock exchange Sunday as investors try to asses the future of the investment vehicle.

"I do think that certain positions that Prince Alwaleed may hold may be under pressure," said King Lip, chief strategist at Baker Avenue Asset Management. "I don't expect any long term effects coming from this. It really does appear that this is more about political consolidation of power by the crown prince than perhaps any corruption."

What typically happens on Wall Street when a hedge fund manager is arrested or charged by the SEC, is that the fund's large holdings will fall as traders look to get ahead of possible forced sales by the fund in order to meet redemptions.

This is a unique case not just because it involves Saudi Arabia, but also because Alwaleed's holdings are not exactly known. Much of the filings are old on KHC and the company likely masks some of its moves through the use of third parties. Theoretically, if it owned stakes above 5 percent in a stock, an SEC filing would say.

Alwaleed confirmed to CNBC on Oct. 23 that he still owned Twitter. Just how much, we do not know.

As of December 2016, Alwaleed owned 4.9 percent, according to InsiderScore.com. Ben Silverman, director of research at InsiderScore, said that stake would make Alwaleed the fifth biggest overall shareholder in the company at the end of the second quarter of this year.

"Our entry point was very reasonable so right now it's hovering around breakeven point," Awaleed said of Twitter last month in the much-publicized interview.

He said the U.S. social network was an integral part of Kingdom Holding's bet on the future of media and commerce.

"I think there could be some volatility in names that the prince owns, but the data suggests he doesn't own significant stakes relative to those stocks' liquidity," said Silverman. "Downside volatility on the news may present an opportunity for investors though there may broader implications from the events in Saudi Arabia that are not immediately apparent."

Alwaleed has owned Citigroup since 1991, famously standing by the bank and buying more shares during the financial crisis. He acknowledged in the October CNBC interview he was still a holder in Citigroup, but, again, the size is not known.

Investors shouldn't look to Kingdom Holding's website for any clues. It currently says the fund still holds News Group, but Alwaleed said in the CNBC interview that he sold that stake. He said they were still a small minor investor in Twenty-First Century Fox.

In that interview, Alwaleed also references KHC holdings in Chinese e-commerce firm JD.com, along with investments in private companies Lyft and Four Seasons.

Kingdom Holding posted a statement on its web site Sunday:

"The Company continues its normal business operations. The executive senior management team affirms its full commitment to continue the Company's work, its commitment to its investors and shareholders, and affirms the support of the Government of the Kingdom of Saudi Arabia. Kingdom Holding is proud of this testimony."

Whether that statement means the company will stand by all the investments of its now detained chairman will remain to be seen.

John Melloy
John MelloyInvesting Editor of CNBC.com



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