Stopping the sale of something you don’t own

This week, Saskatchewan Premier Brad Wall lobbied hard and successfully to have Industry Minister Tony Clement block the sale of Potash Corp to Australian firm BHP Billiton. see story here

There are so many amusing things about this story not the least was the public support to block the sale.  It’s amusing since Potash is primarily owned by Americans.  It’s hard to imagine the difference between Australian shareholders and American shareholders besides what they throw on their barbecues.

Currently, 70% of Potash is owned and controlled by institutional shareholders and 29% is owned by mutual funds.  The biggest players are all American.  Here is a run down of the top ten shareholders.

1. Capital World Investors 7.1 pct 20,972,600

2. PRIMECAP Management Co 3.3 pct 9,660,308

3. Jarislowsky Fraser Ltd 3.0 pct 8,818,148

4. RBC Asset Management Inc 2.9 pct 8,457,726

5. Pyramis Global Advisors LLC 2.5 pct 7,356,095

6. BlackRock Asset Mgmt Canada Ltd 1.9 pct 5,617,370

7. Harris Investment Mgmt Inc 1.7 pct 4,926,303

8. Thornburg Investment Mgmt Inc 1.6 pct 4,660,364

9. Wentworth, Hauser & Violich Inc 1.5 pct 4,557,579

10.Blackrock Institutional Trust Co 1.5 pct 4,432,695

Source: – Thomson Reuters data

I suspect most of the people screaming to block the sale have no idea who Primecap or Capital World is.  In fact if Capital World sold its stake to Blackrock Trust for 138 dollars per share, I doubt the average Joe on the street would know the difference and would care even less.  Yet somehow, this story morphed into a bizarre cartoon displaying public ignorance of basic economic mechanics.

Currently, Saskatchewan people benefit from these mines in the form of jobs and royalties.  Since Saskatchewan has a near monopoly on world supply, it’s hard to imagine those jobs are at risk.  The government determines the royalty regime so nothing changes there either.  All the political blustering is based on false premises  designed to appear to be solving a problem that does not exist.

Imagine if the government stepped in if you tried to sell a rare comic book you bought five years ago.  “Sorry to inform you that we will not allow you to sell that which you legally bought.”  In effect,  a shareholder doesn’t own the shares they bought since they are prohibited from selling them.  Shares were bought but then the state stepped in and declared that in fact, these shares are rented from the state. The government is making a rival claim on the private property of the shareholders.  Private property no longer exists.

All of this was perpetrated by two levels of government that claim to be, and are sometimes accused of being, on the political “right.”  The illusion of political principles wears thinner every day.

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4 Responses to Stopping the sale of something you don’t own

  1. captainorange says:

    I have been totally baffled by this story. With no other rational explanation, is this just the government holding out for a better deal?

  2. dave says:

    Better deal for who? They don’t own the company. When Potash was government owned in the 1980s it was a billion dollars in debt so it was sold to the private sector. Since becoming a private company owned by international shareholders, it is now worth billions. The government has no business determining if private property can or can not be sold.

  3. Kevin Aschim says:

    This is an example of arbitraging a knowledge and values gap in the public’s mind and consolidating political value.

    If we could somehow measure “social energy” in the form of opinion, harvest that and convert it to economic value, then we could literally trade “public stupidity units” or PSU’s on a stock exchange and benefit financially.

    Casino’s have mastered this. We need more things to bet on!

  4. rainswept says:

    As we are not privy to the details of the corruption underlying this particular abuse of state power, baffled is all we can be. I assume that if we remind ourselves of these events as we inspect Wall’s and Clement’s opportunities in the months immediately following their departure from public “service”, our bafflement will be instantly dispelled.

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