NEW YORK(TheStreet) -- After the post-IPO letdowns of Zynga (ZNGA), Pandora (P) and Angie's List (ANGI), Saudi Prince Alwaleed bin Talal's $300 million investment in Twitter on Monday signals a potential new way to invest in the bubbling social media sector.
Like other previous investments made by his fund Kingdom Holding Co., Alwaleed may be targeting a turnaround with his near 3% stake in Twitter, one of the Web's most ubiquitous properties.
"Our investment in Twitter reaffirms our ability in identifying suitable opportunities to invest in promising, high-growth businesses with a global impact," said Alwaleed in a statement announcing the purchase. On Monday, Fortune magazine reported that Alwaleed is likely buying into Twitter from exiting investors without making a direct capital investment in the company.Prince Alwaleed is making his Twitter stake as the company irons out a revamped business model that he hopes will leverage outsized profits from its brand, in a similar fashion to earlier investments in Apple (AAPL) and Priceline.com (PCLN). "Prince Alwaleed typically has looked for investments in very strong brands that -- for whatever reason -- have fallen on challenges," says Scott Kessler, an analyst with S&P Capital IQ. Kessler compares the Twitter investment to previous moves by Alwaleed to put money into Apple and Priceline.com. During the bursting of the technology bubble in 2002, Alwaleed took a $100 million stake in Priceline, representing 5.4% of the company's shares, in a bet that it and others like eBay (EBAY) would survive the slowdown that hit Silicon Valley and Wall Street. Alwaleed invested in Apple beginning in 1995 as the company was suffering from giant losses, competitive pressures from Dell (DELL) and Microsoft (MSFT) and management change before the return of Steve Jobs. Even as Apple and Priceline.com struggled, both companies remained brand names in their respective computers and travel sectors, a key piece of Alwaleed's investing strategy. Alwaleed's stake purchase in Twitter may signal a similar investment in one of the most recognizable media properties on the Web. "I think there are a lot of questions about the people leading the company and its business model," says Kessler of S&P. By calling the move "strategic," Kessler says that Alwaleed is likely targeting a long-term investment in a global brand at a valuation that reflects management turnover and a still uncertain business model. For more on social media, see our portfolio of 5 social networking stocks to watch. Currently, there are over 250 million Tweets per day and 100 million daily active visitors to the site, according to a Monday press release from Kingdom Holdings. The New York Times reports that in its most recent quarter, Twitter saw 2,000% growth in Arabic language Tweets in the year ended in October. The Web site has been central to protests such as the Arab Spring in Egypt, Syria and Libya, in addition to the Occupy Wall Street demonstrations this fall. Time magazine distinguished "the protester" as its person of the year in December.
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