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07-11-2024
RIYADH: Saudi Arabia’s main mission is to diversify its heavily oil-dependent economy. But that “Vision 2030” project is undergoing a transition of its own. The kingdom’s $950 billion Public Investment Fund (PIF), tasked by Crown Prince Mohammed bin Salman (MbS) with delivery, is increasingly focused on a collection of relatively young domestic firms. While this segment’s value now exceeds $250 billion and is growing rapidly, the PIF’s dual mandate of boosting profits and jobs looks tough.
Since MbS started expanding the investment vehicle in 2016, the PIF has made a string of high-profile global bets, like committing, opens new tab $45 billion to SoftBank chief Masayoshi Son’s first Vision Fund, bankrolling a new golf tour, and making contrarian punts on Western blue-chip stocks during 2020 lockdowns. It has also made outlandish plans for flashy “giga-projects, opens new tab” to lure foreign tourists and businesses, the most notorious of which is NEOM, an entire new region in the northwest of the kingdom intended to feature a futuristic 170-kilometre-long city known as The Line, opens new tab.
Yet drill down into what PIF actually is today, and it’s clear that the vehicle’s Governor Yasir Al-Rumayyan has a different focus. The overseas investments, like Newcastle United Football Club and Uber Technologies (UBER.N), opens new tab, collectively amounted to just 20% of assets, or $156 billion, at the end of 2023. Despite the massive spending required to complete the giga-projects, the total investments in that segment and the wider real estate and infrastructure unit amounted to $126 billion, or just 17% of PIF’s assets under management (AUM).
By far the largest portion of the vehicle’s investments, by contrast, sat at home. One bucket, called Saudi Equity Holdings, accounted for 27% of AUM and owned stakes in established listed companies like Saudi Telecom (7010.SE), opens new tab and Saudi National Bank (1180.SE), opens new tab. That was before the government this year transferred 8% of oil giant Aramco (2222.SE), opens new tab into the PIF, which altered the numbers.
The other, much faster-growing segment is called Saudi Sector Development. The division houses about 100 homegrown companies with a paper value of $251 billion as of December, or one-third of total AUM, making it by far the PIF’s biggest division in 2023. The companies include everything from unlisted sports and leisure startups to mining and healthcare groups.
This segment is halfway between a startup incubator and a private equity portfolio. Even more strikingly, its valuation doubled between the end of 2022 and 2023, making it comfortably the fastest growing part of the PIF.
Riyadh’s Future Investment Initiative last week was full of these shiny new companies, which include startups selling Saudi’s distinctive brand of camel-milk ice cream and those focusing on female wellness. Many have hired noted foreign CEOs, attracted by the chance to deploy a ton of cash. SURJ Sports Investments, which is behind the UFC rival Professional Fighters League, is now headed by former Australian soccer executive Danny Townsend. Riyadh Air, an entirely new flagship carrier intended to help ferry 150 million tourists to Saudi by 2030, has secured the services of former Etihad boss Tony Douglas. And Savvy Games, which in 2021 secured $38 billion from PIF to invest in the gaming and e-sports sectors, is led by former senior Activision Blizzard executive Brian Ward.
Assessing the current financial health of these entities is complicated by their youth, and limited disclosure. The aggregate numbers imply an average valuation of about $2.5 billion per company. (Int’l Monitoring Desk)
