Energy

Citigroup, Apple No Longer 'Forever' Holdings of Saudi Prince

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In an interview with Bloomberg News earlier this week, Saudi Prince Alwaleed bin Talal, one of the world’s richest men, said that some of his longest-held and most-prized stocks, once characterized as “forever” holdings, may no longer fall into that category. Alwaleed’s net worth was estimated at $22.5 billion early this year.

Two of the major equity assets of Alwaleed’s investment firm Kingdom Holdings are Citigroup Inc. (NYSE: C) and Apple Inc. (NASDAQ: AAPL), which have been part of the firm’s assets since 1991 and 1997, respectively.

In 2001, Prince Alwaleed told Reuters, “The American economy is solid and I am not selling anything. I will not sell any of my shares in any company.” At the time his investments included $9.65 billion in Citigroup, $1.1 billion in News Corp, $932 million in AOL Time Warner, $534 million in Four Seasons hotels, $314 million in Apple and $300 million in Compaq (later acquired by HP).

On Tuesday, Alwaleed told Bloomberg, “Everything’s on the table. If our interest requires Kingdom Holding to divest from any company, sure we’ll do it. There’s nothing called forever.”

The question, of course, is why now? It’s no secret that low oil prices have hit Saudi Arabia’s foreign exchange reserves hard, forcing withdrawals to meet budget requirements based on price for oil that is no longer realizable. But that hardly seems like a good reason for a private investment fund to consider selling assets, unless the fund’s managers believe something bad is about to happen.

Another possible reason is that the Saudi government may be forced to lift the currency’s peg to the U.S. dollar, although Alwaleed sees that as a “last resort” for two or three years down the road. The riyal has been valued at right around 3.75 to the dollar for 30 years, and has helped insulate the country from volatility in energy markets. Without diversifying Saudi Arabia’s economy away from oil, however, the country’s currency is pegged to the dollar whether or not the relationship is official because oil is priced in dollars and that is not going to change.

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