My friend Serena, who you may know as one of the co-founders of My Mom is a Fob and My Dad is a Fob, is currently trying to find a way out of Thailand, something which protests at Bangkok’s two airports has made much more difficult. I wish Serena and her family the best of luck and a safe trip back.
While a lot of press attention is dedicated to the direct why’s of the protests (demands that the current Prime Minister step down because of his ties to a previously deposed Prime Minister, his brother), less attention is paid to the role that Singaporean sovereign wealth fund Temasek Holdings played in the whole ordeal.
The Former Prime Minister made the mistake of selling his large 50% stake in Thai telecommunications company Shin corporation to Temasek, despite:
- being accused of insider trading only a short while before
- violating a law banning turning over majority control of telecommunications companies by foreign companies
- making the sale without paying any capital gains taxes
The result of these accusations were widespread riots, the Prime Minister dissolving Parliament, and, eventually, him being removed by a military coup.
And so, what have we learned here? Sovereign Wealth Funds are not just mere curiosities whereby oil-rich (Dubai, Mubadala, Norway, etc.) and Asian countries (China, Singapore) buy up HUGE stakes in companies private equity style (some of the research I did on these funds back in January put their total global size at about ~$3 trillion). They have serious political consequences, as the world is only beginning to discover:
- Sovereign wealth funds, for a time, were considered to be potential saviors of the financial markets as they were injecting billions of dollars into the big Wall Street banks, keeping them afloat for just a bit longer
- China’s acquisition of a huge stake in Private Equity firm Blackstone raised a lot of eyebrows in Congress over China’s potential exposure to America’s top business and military secrets.
- A Middle Eastern sovereign wealth fund raised a great furor in Europe when they attempted to buy up EADS, large military contractor and manufacturer of the Airbus planes
- Mubadala backed the spinoff of AMD’s manufacturing assets into the new Foundry Company in a move which may alter the balance between AMD, Intel, and NVIDIA and dramatically change the semiconductor space
Yes, we’re in the midst of a global recession right now, but think – what better time for a sovereign wealth fund to buy up companies then when the prices are low and when governments are least likely to raise a fuss about someone willing to inject capital into their struggling businesses?