Published on : 05/18/2020 – 17:54Modified : 05/18/2020 – 17:54
Since the start of the Covid-19 crisis, Riyadh has invested more than $ 7 billion in companies as diverse as airlines, oil companies, a football club, and even a hotel chain. What most of these groups have in common is that they have been particularly weakened by the consequences of the pandemic.
What does the Newcastle football club, the British oil company BP, Facebook, the American pharmaceutical group Pfizer or even Walt Disney have in common? All these structures are on the shopping list of the Saudi sovereign fund (PIF – Public investment fund) which has multiplied investments since the start of the Covid-19 pandemic. He has spent $ 7.7 billion in three months hoping to get a good deal on the back of corporate financial difficulties during this economic downturn, the Financial Times reported on Sunday May 17.
Among its most important bets, the financial arm of Riyadh bet $ 827.8 million on BP and $ 713.6 million on the American aircraft manufacturer Boeing, particularly affected by the collapse of international transport, according to financial documents transmitted to American stock market authorities, consulted by the Financial Times.
Investments from early April
The targets chosen by the PIF, which have a war treasure of 325 billion dollars, reveal a foolproof opportunism on the part of Saudi investors. Air transport, petroleum, sports, and even hotels – with the purchase of stakes in the Marriott hotel chain … These are all sectors which suffered particularly during this period of confinement. The fund also acquired shares for just under a billion dollars in the American cruise operator Carnival and the California concert promoter Live Nation, two companies whose share price has plummeted since. the start of containment.
The kingdom set up, in mid-March, a team of analysts specifically responsible for spotting good deals, learned the American economic chain Bloomberg. Saudi Arabia was able to start selling at an early age. From early April, when European countries barely came
at to put in place their containment measures, the public investment fund was finalizing its stake in four of the world’s largest oil groups (Shell, Total and the Italian company Eni, and the Norwegian company Equinor). The energy sector was then hit hard by the combined effect of the economic slowdown caused by the pandemic and the oil price war … initiated by Saudi Arabia.
These first Saudi investments of the Covid-19 era got the ear of observers. The sovereign wealth fund is not intended to bet on oil since its official mandate is to seek to diversify the kingdom’s sources of income in order to make it less dependent on black gold. The rise in the capital of the four oil groups was “the signal of the change in strategy of the PIF”, underlines the Wall Street Journal.
Abu Dhabi and Qatar too
But these investors are not content to buy at a bargain price in the hope of realizing a gain when activity resumes. Riyadh is also interested in the potential “winners” of the crisis. Its sovereign wealth fund, for example, has invested approximately $ 80 million on Pfizer, one of the pharmaceutical groups working on a vaccine and several treatments against Covid-19. He also invested in Walt Disney which made a splash with the launch in Europe of the Disney + VOD platform in full containment. “We are actively looking for opportunities, both in Saudi Arabia and internationally, that can generate attractive long-term investment returns,” a PIF spokesperson confirmed to the Wall Street Journal.
For cash-strapped companies, while the global economy is slowing, Saudi’s willingness to take advantage of the situation is also a boon. Especially since the kingdom began to invest at a time when no one else wanted to commit, recalls the Financial Times.
Failing to convince Riyadh, these groups can always hope to find a more attentive ear among the neighboring countries of the region. “We present all possible opportunities to the Gulf countries, which will be able to do business in gold,” said a London business banker, interviewed by the Financial Times. Mubadala, one of the most active public investment vehicles in Abu Dhabi, and the Qatari sovereign wealth fund are also ready to draw their checkbooks, according to the British financial daily. “Everyone is preparing their own to-do list,” said a golf investor who was interviewed by the Financial Times.
This rush on the companies in difficulty recalls the period of the financial crisis of 2008. Saudi Arabia, Qatar or even Abu Dhabi had then invested billions of dollars in British real estate, American banks or even German car manufacturers .
But the context is different this time. In 2008, the Gulf countries were much less exposed to bad debts which almost brought down the American and European banking systems. The economic consequences of the current pandemic are sparing no one, and the plummeting oil prices are weakening the finances of the wealthy oil monarchies.
This is particularly evident in Saudi Arabia. “The Kingdom has not experienced such a crisis – whether health or financial – for decades,” said Mohammed al-Jadaan, finance minister at Al Arabya channel. Riyadh has had to take unprecedented measures in recent weeks to help its economy. The government has resolved to generously draw on its reserves, which have melted close to $ 30 billion in one month.
With about $ 480 billion still in the pockets, there is certainly something to come. But this spending forced Riyadh to revise its budget deficit forecast upwards. Above all, “most economists agree that to finance these recovery plans the country will have to put aside or outright cancel some of the projects of Crown Prince Mohammed bin Salman to reform Saudi Arabia,” notes Wall Street. Newspaper.
Beyond a strong economic price, the coronavirus crisis is therefore likely to cost politically dear to the crown prince, who has often linked his legitimacy to his ability to bring his country into a certain modernity, rid of his submission to the black gold.