The headline you'll never see: Canadian investors fleece foreigners

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Here is a headline that will never, ever run over a foreign takeover story: "Foreign buyers taken to cleaners by savvy Canadian investors."

The reason you will never see that sort of a headline is that all stories in which foreigners buy Canadian-owned assets are based on the assumption that foreign investors are – yet again! – snapping up Canadian-owned assets on the cheap, and why oh why won't Ottawa intervene and put a stop to it? The notion that Canadian investors are fully capable of assessing the value of their holdings and that they might earn a tidy profit in selling them never seems to make an appearance in these accounts.

The list of stories in which this narrative has been recounted is long, and the most recent entry is the bid for Viterra, a grain-handling company. The fact that the price of Viterra shares have increased by 50 per cent since the takeover bid was announced - a windfall that would otherwise be pocketed by its Canadian owners – seems almost beside the point. It is, apparently, the duty of Canadian investors to refuse profit opportunities when they originate from outside our borders.

It has long been established that the myths surrounding the negative effects of foreign ownership are inconsistent with the data - see here and here for two recent studies. Nor does it make any sense to view these sales as evidence of an unfortunate tendency among Canadian investors to take the money and run. As a quick glance at Cansim Table 376-0055 will show, Canadian foreign direct investment holdings abroad are greater than foreign FDI holdings in Canada. (No, there is no prize for winning this zero-sum game.)

The knee-jerk reaction against foreign takeovers is something Canadians have to get past. No public good is served by assuming that Canadian investors are incapable of getting the best price for their assets.

Stephen Gordon's recent posts and Twitterfeed can be viewed here.

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