Riyadh: Saudi Arabia has signalled it is adopting new strategies to invest its petrodollars – more aggressive, more high-profile and more closely linked to its economic development plans – with the $3.5 billion purchase of a stake in US ride-hailing firm Uber.
The deal makes the Saudi Public Investment Fund (PIF) a player in the technology start-up market – a break from Riyadh’s past emphasis on conservative, low-risk foreign investments.
It also makes Riyadh part-owner in a firm which could help to rescue the kingdom from low oil prices by diversifying the economy and creating jobs for local citizens.
PIF Managing Director Yasir Al Rumayyan referred to these goals in a statement on the deal, saying the fund aimed not only to make money but also to support a sweeping economic reform plan announced in April.
The plan focuses on “unlocking strategic sectors such as tourism and entertainment, boosting employment opportunities and women’s participation in the workforce, and encouraging entrepreneurship”, he said.
For decades, Saudi Arabia was a low-profile investor in global markets, using the central bank as its main sovereign fund. It stored most of its oil wealth in assets such as US Treasury bonds and bank accounts, instead of the large strategic stakes in top Western companies bought by other sovereign wealth funds such as Qatar Investment Authority (QIA).
That is changing as low oil prices saddle Riyadh with an annual state budget deficit of nearly $100bn, forcing it to find ways to earn higher returns on its assets and develop non-oil sectors of the economy.
In April, Deputy Crown Prince Mohammed bin Salman identified the PIF as a key part of this drive. He said the fund would expand from 600bn riyals ($160bn) to over seven trillion riyals, helping make Riyadh a global “investment power”.
The Uber deal signals this process has begun, said an adviser to sovereign funds in the Gulf, declining to be named because he was not authorised to speak to the media.
“It’s possibly more of a ‘signature deal’ to show their presence – a first deal that will make headlines – rather than a good deal financially,” he said.
Uber said its most recent financing round valued it at $62.5bn, implying the PIF obtained a stake of about five per cent. The Saudi fund may have bought at a less attractive price than investors in earlier rounds of financing for Uber, such as QIA.
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