More and more every day American Companies are selling stock in their companies to foreign investors. It’s a great deal for the corporations and stock brokers becaus ethese foriegn investors are willing to pay a lot more than the stock is worth to make the aquisition.
No matter who the investor is, they don’t do anything for nothing. You have to ask that if they are willing to pay more than something is worth, why are they willing to do that?
>From The NYTimes
Shares rose on Monday after a billion-dollar investment deal between Merrill Lynch and the Singapore government raised hopes that wealthy foreign investors would come to the rescue of America’s ailing investment firms.
Investors were cheered by news that Alcoa, the aluminum producer, was selling its packaging and consumer businesses to a company in New Zealand for $2.7 billion. Reynolds Wrap, the kitchen staple, will no longer be an American product.
>From the Washington Post
A report issued by Morgan Stanley economist Stephen Jen estimated that funds such as the United Arab Emirates ADIA ($875 billion), Russia’s stabilization fund ($32 billion) and Singapore’s Temasek Holdings ($100 billion) collectively hold $2.5 trillion in assets — a sum equal to about 18 percent of the value of the S&P 500.
General Electric sold its plastics unit to Saudi Basic Industries Corp. (SABIC), which is 70 percent government owned. The private equity firm Blackstone Group announced that China’s State Investment Co. is buying a 10 percent stake for $3 billion.
This phenomenon presents opportunities for Americans… Portfolio managers on Wall Street are salivating at the idea that China’s government may start rolling cash into the S&P 500 index, for example.
Of course they are salivating. It allows them to make huge commissions while they sell these corporations to foriegn investors. They don’t care what it means to America. They care that they can buy another really cool car or another vacation house.
When governments own companies, that creates the potential for geopolitical mischief. Hugo Chavez has used the Venezuelan government’s shares of Citgo … to poke his fingers in the eyes of the U.S. government. In Russia, Vladimir Putin has used state control of energy companies as a political tool against domestic enemies and a diplomatic tool against Russia’s neighbors.
Foreigners own 45 percent of U.S. publicly held debt, in the form of low-yield government bonds. As long as we pay the interest, the debt doesn’t entitle the foreigners to any say in how we run our Government.
But stock investors have a say in how the corporations they own are run. … One could imagine a day when the Chinese or Saudi government is a top shareholder in blue-chip companies.
What’s more, the foreign state-affiliated companies tend to cluster in industries that have a bearing on national security: logistics, infrastructure, oil, petrochemicals, airlines. Remember the outrage when Dubai Ports World wanted to buy a British company that operated U.S. ports? Or when the Chinese-government-controlled petroleum company CNOOC tried to buy Unocal in August 2005? Expect more of these episodes. China is thought to be setting up a $300 billion investment fund…
Other concerns arise from the prospect of foreign governments acquiring big chunks of corporate America. Fortune 500 companies such as General Electric are comparatively enlightened employers when it comes to issues of gender, race, sexual orientation and religion. Can anybody say the same about Saudi Arabia? What kind of future might a female Jewish engineer with G.E. plastics have at SABIC?
These governments could buy up the controlling interest in these huge corporations. These are the same corporations that exert a huge amount of influence on our politicians and provide the money for their campaigns.
That means that foreign governments could soon be controlling our foriegn policy and even domestic policy. Are you ready for election reform yet?
We either need to get the money out of politics or make laws about how much stock major corporations can sell to foreign investors.
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