(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
By Una Galani
DUBAI, March 19 (Reuters Breakingviews) - The controversy
over the true value of Prince Alwaleed’s investment vehicle has
some simple remedies. Kingdom Holding 4280.SE, with stakes in
everything from Citigroup (C.N) to Twitter, is at the centre of
a bitter row with Forbes magazine over the exact size of the
prince’s wealth. Part of the problem is that the Riyadh-listed
company suffers from a tiny free float, limited liquidity, and
puzzling share-price movements.
Kingdom has a listed value of $19 billion but only a 5
percent free float in a market where 30 percent is closer to the
norm. Alwaleed wanted to list up to one third when it went
public in 2007 but the firm and the regulator agreed at the time
that it would be too much for the market to absorb. The problem
is that stocks with small free floats are more susceptible to
share-price volatility or even market manipulation.
The prince’s flagship firm is actively exploring its options
to become a more liquid stock, according to a person familiar
with the company’s plans. One way would be for Alwaleed to sell
down. But that would look bad in the wake of the clash with
Forbes and would send the wrong signal about Kingdom’s value.
Alternatively, Kingdom could sell some new shares. The
difficulty here is that the firm doesn’t have an urgent need to
raise cash and can ill afford to run an inefficient balance
Kingdom could of course issue stock in support of a big
deal. The snag is that it would have to be a sizeable
acquisition to result in a meaningful dilution of Alwaleed. And
the target might be loathe to take paper whose value is the
subject of such a fraught debate. Still, investment banks could
be hired to conduct an independent valuation.
The radical option would be to delist. That would be the
least palatable for the prince. Fading into the background isn’t
Alwaleed’s style and risks being perceived as failure in a
region where initial public offerings are a symbol of pride. But
if an illiquid free float is causing such difficulty, it is hard
to see how the listing’s benefits outweigh its costs.
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- Saudi Prince Alwaleed bin Talal and his flagship
investment vehicle, Riyadh-listed Kingdom Holding, said on March
5 that it had severed ties with Forbes’ billionaires list after
a row over the prince’s net worth.
- Forbes magazine subsequently published a lengthy
investigation into Kingdom Holding. The prince controls 95
percent of Kingdom’s shares.
- The magazine said: “We value his [Alwaleed’s] Kingdom
Holding stake at $10.6 billion, or $9.3 billion less than what
the market cap suggests”.
- Shadi Sanbar, chief financial officer of Kingdom, said:
“KHC puts a premium on tracking the true value of our
investments and it is contrary to both our practice and nature
to assist in the publication of financial information we know to
be false and inaccurate.”
- Kingdom was listed in 2007, and holds stakes in Citigroup
- Forbes: Prince Alwaleed and the curious case of Kingdom
Holding stock link.reuters.com/gek76t
- Kingdom Holding press release link.reuters.com/hek76t
- For previous columns by the author, Reuters customers can
click on [GALANI/]
(Editing by Chris Hughes and Sarah Bailey)
Keywords: BREAKINGVIEWS ALWALEED/SAUDI/
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