Another value investor

[UK]

https://www.wsj.com/articles/saudi-arabia-mbs-mohammed-bin-salman-public-investment-fund-11672766494?mod=hp_lead_pos11

 

As the Covid-19 pandemic sent global markets swooning in early 2020, Saudi Arabia’s Crown Prince Mohammed bin Salman, sensing opportunity, pressed the country’s sovereign-wealth fund to go on an international stock-buying spree. The board of the Public Investment Fund, or PIF, resisted the move as too risky, but soon found itself overruled by an even higher authority, Prince Mohammed’s father, King Salman, according to an October podcast by the PIF governor, Yasir al-Rumayyan. Without sufficient liquid assets to satisfy the prince’s desire to move quickly, the PIF prevailed on the Saudi central bank to give it tens of billions of dollars, despite concerns from government officials that doing so might undermine the local currency’s peg to the dollar, according to people familiar with the matter. Prince Mohammed, the PIF chairman, personally picked many of the stocks the fund bought, fast-tracking the purchases through an ad hoc committee that bypassed normal decision-making channels, these people said. The $35 billion deployed by the PIF quickly turned into $49 billion when markets rallied, Mr. Rumayyan said on the podcast. But the episode escalated a power struggle over the future of the world’s seventh-largest sovereign-wealth fund, now with $600 billion under management, according to interviews with current and former employees, consultants and other people familiar with the fund. On one side is 37-year-old Prince Mohammed, the fund’s chairman since 2015, who dabbled in stock picking as a youth and has led the PIF into investing in videogame makers, luxury-car manufacturers and an English soccer team. On the other is a growing group of professional financiers who are trying to put guardrails around how the kingdom’s oil wealth is spent. The outcome will help shape the future of Saudi Arabia’s economy. The kingdom, flush with cash from higher oil prices, is aiming to grow the PIF into a $2 trillion behemoth by 2030.

 

Consultants and people who work with the PIF said it is like any company or investment fund around the world that is dominated by a big personality or deal maker, and much of what the prince—or the governor, Mr. Rumayyan—recommends is based on a broader economic rationale. A case in point: Prince Mohammed’s interest in electric vehicles is well-known. In 2018, the PIF began putting money into EV startup Lucid Group Inc., investing $3.8 billion in all. Its 60% stake is now worth roughly $7 billion. Meanwhile, the California-based car maker has broken ground on a factory in the kingdom slated to create jobs for the Saudis, a win for the PIF’s dual strategy of investing for financial return while developing the domestic economy. Other times, the crown prince’s interests have led the PIF into investments like Noon.com, an e-commerce website that planned to take on Amazon.com Inc. In the past two years, Noon suffered losses of $520 million, according to the PIF prospectus. The value of PIF’s current stake or whether it has invested further couldn’t be determined. Noon declined to comment. In 2018, after Prince Mohammed, an avid gamer, tried an augmented-reality product from a buzzy startup called Magic Leap, the PIF invested $400 million. At the time, the investment valued Magic Leap at more than $6 billion. By 2021, when the PIF took a majority stake, the company was struggling financially and the valuation had slipped to $2 billion. The prince’s biggest bet, a $45 billion commitment in 2017 to SoftBank’s Vision Fund, has lagged behind the overall market and hasn’t produced the flurry of foreign investment by technology companies into the kingdom envisioned by the PIF leadership. The PIF invests domestically in dozens of new companies and real-estate developments such as a 75-mile long skyscraper, as well as internationally in private equity and stocks and sports initiatives such as the Newcastle Football Club and LIV Golf. “Our results speak for themselves,” the PIF said. “PIF is helping drive the transformation of the Saudi economy and generating strong financial returns and economic opportunities for the people of Saudi Arabia, our ultimate stakeholders.” Saudi officials said Prince Mohammed listens to his advisers and sometimes argues with them about how best to manage the government’s finances and the PIF’s investments. But he has the final word in both arenas, they said. “He’s very passionate about the economy, and sometimes we spend many hours arguing, including with His Royal Highness,” said Finance Minister Mohammed al-Jadaan, a PIF board member who has championed a series of moves to shape how PIF money is spent. In an interview, Mr. Jadaan called the 2020 central-bank transaction an extraordinary one-off episode.

 

In the spring of 2018, Prince Mohammed asked Mr. Rumayyan to buy a stake in Tesla, spending $2 billion on shares available on the public markets, people familiar with the request said. Later that year, Mr. Rumayyan met with Tesla Chief Executive Elon Musk for a discussion about further investment, a meeting that became the precursor to a set of tweets Mr. Musk posted saying he was taking the company private and had “funding secured.” The Securities and Exchange Commission later sued Mr. Musk for allegedly fraudulent statements and he settled the case, while denying wrongdoing. The debacle unsettled PIF executives, according to people aware of their thinking. When Tesla’s share price recovered to above the fund’s entry, Mr. Jadaan asked PIF executives to sell the shares, according to people familiar with the directive. Tesla’s shares later rocketed, and the PIF’s stake in the company would now be worth roughly $11 billion if it had simply held on to the original investment.

 

Edited January 4, 2023 by UK

[ValueArb]

Supposedly PIF has a significant piece of Twitter, which is concerning given Saudi Arabia intelligence services have co-opted Twitter employees to track dissidents before. They are apparently on Elon's speed-dial to raise more money from whenever  he needs.

[Gregmal]

I’m not sure I’d trust much of the negative spin in its entirety. Is a Twitter stake really any worse than the spac or ESG junk Western institutions invest in? I also recall the Saudi funds going nuts buying stocks in March 2020. LYV at like $12 iirc, stuff like that. Same time as you had the domestic hero’s like Marks and Drunkenmiller calling for a Great Depression. 

[ValueArb]

43 minutes ago, Gregmal said:

I’m not sure I’d trust much of the negative spin in its entirety. Is a Twitter stake really any worse than the spac or ESG junk Western institutions invest in? I also recall the Saudi funds going nuts buying stocks in March 2020. LYV at like $12 iirc, stuff like that. Same time as you had the domestic hero’s like Marks and Drunkenmiller calling for a Great Depression. 

 

Supposedly the reason the Saudi's rolled over their $2B stake in Twitter was that they thought the $54.20 offer undervalued Twitter. That doesn't sound like value investors to me.

[Gregmal]

Just now, ValueArb said:

 

Supposedly the reason the Saudi's rolled over their $2B stake in Twitter was that they thought the $54.20 offer undervalued Twitter. That doesn't sound like value investors to me.

People said the same thing about the initial Tesla investment(no not the 2018 one but the decade old stuff) and they also said Dan Loeb is a value investor even though he owned Rivian. Who cares what the label is? Purpose of investing is to make money. Not “be a value investor”. Brookfield is considered a value investor and they overpay for malls.

[ValueArb]

I agree labels don't matter. But I question their valuation skills when the Twitter acquisition was done at 9 times sales and 180 times operating earnings. Revenue growth was 36% in 2021 (COVID bump?), but earnings were down and it had averaged around 20% growth the last three years. 

 

That's a speculation, not an investment, and doesn't strike me as especially smart. Basically a bet on an Elon turnaround, but even if he pulls it off, its likely they still paid well over 40 times earnings in the best possible outcome.

[Gregmal]

I wouldnt overthink it. Thats chump change to them. Folks speculate all the time. Watch what they do with Liverpool or ManU. Theres probably not a valuation metric there either, nor was there when Tepper or Balmer bought their clubs. Sometimes when you have lots of resources, you simply want to own things that may eventually have a strategic purpose. Its not always about an IRR. People shit on Softbank and Ark but now want to celebrate the fact that Greenlight just got back to where it was in 2015 cuz theyre "value investors"...

[Xerxes]

For clarity, unless I am mistaken (from memory), Twitter investment that got rolled into that “private equity” was not from PIF but a personal investment of Saudi billionaire. 

 

[Xerxes]

Just verified on line 

 

https://www.forbes.com/sites/mattdurot/2022/10/31/saudi-prince-alwaleed-becomes-twitters-second-largest-shareholder/?sh=26e9bc69523a

[UK]

Value or not, I actually thought it was cool he loaded on shares with central bank's cash in spring 2020, not many did, even BRK did not.

[Xerxes]

Even more cooler than that, is the Swiss National Bank, which conjurs Swiss Francs out of thin air, Et Voila!, sells it in the FX market for U.S. dollar, and use the proceeds to buy the big U.S. technology names in the past decade.