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High bids are not strong evidence of ulterior motives. They reflect the fact that many US companies prefer not to take on foreign investors, so those investors

by tlb 7y ago

High bids are not strong evidence of ulterior motives. They reflect the fact that many US companies prefer not to take on foreign investors, so those investors have to bid much higher to get the deal.

mbesto 7y ago
> so those investors have to bid much higher to get the deal. And return less money to their fund than they would if they were acquiring companies domestically? Scratches head...
- tlb 7y ago
  There is a lot of unwanted money sloshing around. If you’re an oligarch or kleptocrat with billions to invest, you’re gonna have to accept lower returns. One reason that Ivy League endowments get consistently above-market returns is that everyone is comfortable taking their money. EDIT: I sort of conflated foreign and kleptocrat money there, saying they both have to outbid preferred sources. Most foreign money is not from kleptocrats, of course.
JumpCrisscross 7y ago
> They reflect the fact that many US companies prefer not to take on foreign investors There is no evidence for this being the cause of the price premium. There is substantial evidence that capital flight predicts which countries overpay for foreign assets. Russia and China are better explained by the capital flight hypothesis.
- nostrademons 7y ago
  Economically it'd be both. Capital flight increases the supply of loanable funds available for foreign investments. Unwillingness to take on foreign investors decreases the demand for this. High supply + low demand = a poor price.
  - JumpCrisscross 7y ago
    > Economically it'd be both It could be both. We only have evidence for the supply hypothesis (i.e. capital flight). American companies requiring a higher price for foreign investors sounds plausible. But it's a guess for which we have zero evidence, particularly at a systemic level. (Fixed demand and higher supply still lower prices.) One test might be found in comparing pricing and flows for foreign investors around investment vectors companies have discretion around (e.g. private investment or M&A) to vectors with which they don't (e.g. public markets). You'd have to control with prices and flows from American investors in those markets, too, which makes it difficult.

by tlb 7y ago

mbesto 7y ago

> so those investors have to bid much higher to get the deal. And return less money to their fund than they would if they were acquiring companies domestically? Scratches head...

tlb 7y ago
There is a lot of unwanted money sloshing around. If you’re an oligarch or kleptocrat with billions to invest, you’re gonna have to accept lower returns. One reason that Ivy League endowments get consistently above-market returns is that everyone is comfortable taking their money. EDIT: I sort of conflated foreign and kleptocrat money there, saying they both have to outbid preferred sources. Most foreign money is not from kleptocrats, of course.

JumpCrisscross 7y ago

> They reflect the fact that many US companies prefer not to take on foreign investors There is no evidence for this being the cause of the price premium. There is substantial evidence that capital flight predicts which countries overpay for foreign assets. Russia and China are better explained by the capital flight hypothesis.

nostrademons 7y ago
Economically it'd be both. Capital flight increases the supply of loanable funds available for foreign investments. Unwillingness to take on foreign investors decreases the demand for this. High supply + low demand = a poor price.
- JumpCrisscross 7y ago
  > Economically it'd be both It could be both. We only have evidence for the supply hypothesis (i.e. capital flight). American companies requiring a higher price for foreign investors sounds plausible. But it's a guess for which we have zero evidence, particularly at a systemic level. (Fixed demand and higher supply still lower prices.) One test might be found in comparing pricing and flows for foreign investors around investment vectors companies have discretion around (e.g. private investment or M&A) to vectors with which they don't (e.g. public markets). You'd have to control with prices and flows from American investors in those markets, too, which makes it difficult.