Mega billionaire Prince Alwaleed bin Talal is still detained on potential probes into money laundering, bribery and extortion, but now his hands may be tied.
He is facing two possible options.
The first is pay $6 billion or one-third of his wealth, according to the Wall Street Journal (WSJ), and this will ultimately doom his company Kingdom Holding
The second is, should negotiations fail, face the possibility of prosecution and a potential court decision to dismantle his $10bn Kingdom Holding.
Stuck between a rock and a hard place.
Did Alwaleed have another option?
High price to pay, regardless
WSJ said the prince can win his freedom by forking at least $6bn, a sum that is the highest demanded from any of the current or former detainees, according to sources familiar with the matter telling the daily.
Bloomberg’s Billionaires Index puts Alwaleed’s wealth at$18bn making him the 57th-richest person in the world and the Middle East’s wealthiest individual.
While no businessman is willing to let go of $6bn in cash, some might look to sell assets or give up part ownership of companies in their portfolios.
That’s what Alwaleed is negotiating with the government, according to WSJ.
The deal is that he would give Saudi authorities majority control of Kingdom Holding which is listed on Tadawul and valued closer to $9bn today, following a $750,000 share price hit when Alwaleed was detained and is down in value about 14% since the prince’s arrest.
Cash equals guilt
WJS reported its sources as telling it that Prince Alwaleed would not hand over $6bn in cash as this would be an admission of guilt and would require him to dismantle the financial empire he has built over 25 years.
While the prince may relinquish control of Kingdom Holding, he is proposing to stay on in a leadership role in a new state-backed company, one person close to him told WSJ.
The other option is a fight till the end.
“Keeping under his control, that’s his battle,” the person said.
“The prince has indicated to people close to him that he is determined to prove his innocence and would fight the corruption allegations in court if he had to,” said WSJ.
Saudi officials have previously said they expected to “recoup” money worth $100bn from settlements with those arrested last month.
Prince Miteb bin Abdullah already paid $1bn or more to earn his freedom.
Quick Alwaleed bio
According to WSJ, Prince Alwaleed is one of the top shareholders in banking giant Citigroup. He has big stakes in Twitter, Apple, Motorola and Lyft. He owns 45% of Four Seasons Hotels & Resorts and has a substantial interest in Disneyland Paris. He’s funded some of the world’s largest real estate developments, including Canary Wharf in London and Jeddah Tower in Saudi Arabia, soon to be the tallest building in the world.
Kingdom Holding’s liquidation effects
Should all negotiations fall apart and Saudi authorities decided to liquidate some or all of Kingdom Holding’s investments, there likely won’t be a large ripple effect on global markets.
Kingdom Holdings’ $10-billion valuation is much too small if compared to Warren Buffett’s Berkshire Hathaway valued at $460bn and the Vanguard Group, which has $4.5trn in assets under management. As for stock markets, while a sudden sell off can have major market consequences, the impact of such a liquidation may not be considered as a vote of no-confidence in the Western companies affected.
For local markets, like Saudi Tadawul, the region’s largest, at $570bn market capitalization, a $10bn scratch would be a 2% hit that would reverberate around the region.