Saudi Arabia Arrives in Paris, Shopping for Deals

‘An operation of seduction’

Just days after the PGA-LIV Golf merger was announced, a contingent of Saudi Arabian investors and power brokers, including the crown prince, Mohammed bin Salman, has converged on France this week looking for more deals with potentially trillions to spend.

First stop: Paris’s leading tech event. The “Invest in Saudi” booth at VivaTech — where Elon Musk and the luxury tycoon Bernard Arnault are also on the program — has an outsized presence. Paid for by the Saudi Ministry of Investment, the booth serves as a kind of billboard to announce the country’s ambitions and a way to help its entrepreneurs attract Western investors and prospective business partners, Vivienne Walt writes for DealBook.

Bumper oil revenues have already transformed the country’s sovereign wealth fund, chaired by Prince Mohammed, into an investing force with about $35 billion in U.S. assets alone (including stakes in Uber, PayPal and Electronic Arts) and a mandate to diversify the economy beyond fossil fuels.

Badr Al Badr, the deputy minister for investor outreach, told DealBook that Saudi Arabia has about $3.2 trillion to invest by 2030. “That is why there are so many opportunities for investors,” he said.

The Saudis are looking across sectors. Saudi soccer clubs have snapped up star European players for fortunes, and are reportedly looking for more. And at last month’s Cannes Film Festival, the kingdom — where cinemas were banned for decades, until 2017 — unveiled $180 million in funding for moviemakers.

Awash in cash, the kingdom is trying to build a new public image. People in the investment world seldom mention its long track record of human rights abuses, Saudi investors say. That includes the kingdom’s role in the 2018 killing of the journalist Jamal Khashoggi, which the C.I.A. found was likely carried out with the knowledge of Prince Mohammed. Saudi Arabia has cut plenty of deals since then, and investor interest is rising fast: private equity and venture capital firms are looking to the kingdom for funding, particularly as China is increasingly off limits.

The Saudi royals’ iron grip on power remains undiminished. Prince Mohammed is said to have final say in investment strategy, and the country’s wealth gives him leverage well beyond business.

As part of a weeklong visit to France, the crown prince (who owns a $300 million chateau near Paris) is set to have lunch on Friday with President Emmanuel Macron at the Élysée Palace, to discuss the kingdom’s potential role in Ukraine peace negotiations.

On Monday, Saudi officials and executives will also gather for a daylong investment summit. On the agenda: Riyadh wants to host the 2030 edition of the World Expo, whose governing body is headquartered in the French capital.

Final stop: the Paris Air Show next week. The prince could announce a big purchase of Airbus planes, according to a report in the French newspaper Le Figaro, which called his visit “an operation of seduction.”

HERE’S WHAT’S HAPPENING

Goldman Sachs’s role in Silicon Valley Bank’s last days is reportedly being examined. The Fed and the S.E.C. are looking into Goldman’s role in buying the tech lender’s securities book while advising on its doomed capital raise, according to The Wall Street Journal. It’s the latest point of pressure on Goldman over its dual roles as Silicon Valley Bank collapsed, which DealBook first reported in March.

BlackRock takes a big step into crypto. The investment-management giant moved on Thursday to create a spot Bitcoin E.T.F., using Coinbase as the fund’s custodian. It’s a move by BlackRock to more tightly embrace crypto as the S.E.C. cracks down on the industry; the agency has yet to allow any spot Bitcoin E.T.F.s.

China is said to plan new economic stimulus measures. Beijing is exploring potentially billions in fresh infrastructure spending and loosening rules for people to invest in new property, according to The Wall Street Journal. Such moves would follow efforts by the Chinese government to kickstart an economy that has unexpectedly stalled out despite the end of pandemic restrictions.

Disney’s C.F.O. is stepping down. Christine McCarthy is taking a “family medical leave of absence” on July 1 before helping to identify a successor. She helped Disney navigate the pandemic, but increasingly clashed with then-C.E.O. Bob Chapek and sounded out Bob Iger about returning to lead the media giant.

Is the I.P.O. market poised to reopen?

Shares in Cava, a Mediterranean-oriented fast-casual restaurant chain, doubled in their trading debut on Thursday, valuing the company at nearly $4.9 billion. That performance has many on Wall Street wondering whether the largely frozen market for initial public offerings is finally opening up — and what kinds of companies can take advantage.

Cava’s stock jumped as much as 117 percent, closing at $43.78. That’s nearly double what the company had priced its shares at in the offering, after having already raised its price range. Such a performance harkens back to rosier eras for I.P.O.s, where investors eagerly bid for a piece of fast-growing, and often unprofitable, companies.

Cava is among them. The 12-year-old company hasn’t yet earned a profit, and has been expanding quickly, going from 22 locations in 2016 to 263 now — with ambitions to hit 1,000 by 2030.

Some see reasons for hope for the I.P.O. market, which is currently at its slowest pace since 2009. Perhaps investors are willing to gamble on risky stocks again, despite the Fed saying it’s not done raising rates. (Consider that shares in the Cava rivals Chipotle and Sweetgreen have rebounded impressively this year.)

Cava’s success is especially heartening for other restaurant chains poised to go public, including Panera and the parent company of Fogo de Chão.

Then again, other high-profile companies that have gone public recently, including the Tylenol maker Kenvue, have seen their stock performances fade after promising debuts.

A call for ‘urgent hearings’ on A.I.

Representative Maxine Waters, Democrat of California and one of Congress’s longtime financial watchdogs, is asking Republicans to immediately schedule a hearing on how banks and other financial firms are using artificial intelligence in their businesses, Emily Flitter writes for DealBook.

Ms. Waters is worried about A.I.’s effects on consumers. The top-ranked Democrat on the House Financial Services Committee urged the panel to investigate how the technology is enabling financial services companies to “make complex consumer and investment decisions with minimal human direction.”

She singled out the explosive popularity of generative A.I. powered chatbots like ChatGPT, Microsoft Bing’s A.I. feature and Google’s Bard, which have captured the imagination of the business world and the public at large.

The tech industry has said it’s open to some oversight. In Senate testimony last month, Sam Altman, C.E.O. of the ChatGPT creator OpenAI, urged Congress to regulate this new generation of A.I. tools. “I think if this technology goes wrong, it can go quite wrong,” he said at the time. “We want to work with the government to prevent that from happening.”

Ms. Waters echoed that concern. While seeing the potential for A.I. to expand financial access for consumers, she added in her letter, “The speed at which A.I. is being developed can potentially outpace Congress’ and regulators’ roles in fully assessing and understanding the harms of A.I. systems and the ability to put in place integral consumer and investor protections.”

Her call may gain some traction. Representative Patrick McHenry, the North Carolina Republican who chairs the panel, has expressed privacy concerns about the rapidly evolving technology.

Spotify breaks away from royalty

Spotify and Archewell, the media company founded by Prince Harry and his wife, Meghan, said on Thursday that they’re ending their exclusive content partnership after two and a half years.

The news speaks to tensions between the two sides — and, perhaps more important, to the changing outlook for what was meant to be one of Spotify’s breakout businesses.

The Archewell deal yielded just one podcast: Meghan’s “Archetypes,” which topped the charts in several countries when it made its debut in 2020.

Depending on whom you talk to, the deal ended because Harry and Meghan wanted to expand beyond Spotify’s walled garden — as have other podcasters like the Obamas and Brené Brown — or because they didn’t produce enough content for Spotify. In any case, it’s unlikely the couple will earn out the full $20 million of their deal.

And it’s a reminder that Spotify’s pricey podcast bet hasn’t worked out. Eager to move beyond music streaming, a business that will fork over lots of money to labels in perpetuity, the company spent over $1 billion on podcasting, including $400 million for the studios Gimlet and The Ringer and hundreds of millions for deals with the likes of Harry and Meghan (to say nothing of the reported $200 million for Joe Rogan).

Since then, Spotify has moved to cut jobs from the division, retire the Gimlet and Parcast brands and focus more on offering podcasting tools than drawing in subscribers with Spotify-only shows.

THE SPEED READ

Deals

• Citigroup’s latest set of 5,000 job cuts puts Wall Street layoffs this year at more than 11,000. (FT)

• Carlyle’s new C.E.O., Harvey Schwartz, has identified lending as a top way to boost the investment firm’s fortunes. (Bloomberg)

• Bank of America pledged to invest $500 million in minority- and women-led funds, while the N.F.L. is borrowing $78 million from Black- and minority-owned financial institutions. (CNBC)

Policy

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