Microsoft Buys Skype for $8.5 billion: Why Should Canadians Care?

 

If you’re an enterprising entrepreneur with that game-changing product or service, there might be an investor waiting for you. In case you’re wondering, I’m not referring to Kevin O’Leary or any of his vulture capitalist cronies from Dragon’s Den or Shark Tank. The investor I’m talking about is worth more than all of those individuals combined. The investor I’m talking about is the Canada Pension Plan Investment Board (CPPIB).

The CPPIB is an independent board at arms length from the Canadian Government and is entrusted with the responsibility of managing an asset pool of over $140.1 billion of taxpayer money.  This asset pool is the largest pension fund in Canada and one of the largest asset pools in the world. The CPPIB’s mandate is to maximize its long-term investments with undue risk and to invest in the best interest of Canada Pension Plan Contributors. By 2021, this fund will be the source from which all CPP benefits are paid.

The recent announcement about Microsoft’s purchase of Skype for $8.5 billion should give Canada’s future pensioners reason to rejoice. This is because the CPPIB has made  $1 billion off of this deal to further enlarge its pool of funds for the benefits of Canadians.

In late 2009, the CPPIB invested $300 million dollars to purchase a stake in Skype from eBay. At the time, Skype was valued at $2.75 billion. However, the recent purchase of Skype for $8.5 billion has more than tripled the CPPIB’s investment.

As we move into the future, the changing demographics will certainly demand more CPP payouts to a dramatically increasing number of seniors. As the population ages, there will also likely be higher benefits being paid out for disability claims. These challenges demand solid investments on the part of the CPPIB to avoid fund drainage.

On April 12, 2011, it was announced that the CPPIB along with several co-investors provided a $350 million investment in Black Swan Energy Ltd. for a hydrocarbon exploration project in Western Canada. It’s a likely bet this will be a profitable undertaking given the CPPIB’s tendency for picking the winners. What will be the next great CPPIB investment? …Could it be your start-up business?

 

 
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