Well Done GIC for Investing in DoorDash ! Too Bad for CPF Holders Who Don’t Get to Share the Profits
Two days ago the US online food delivery company DoorDash debuted on the New York Stock Exchange and its shares popped by 86% though today they have come off nearly 10% since then. GIC, which is listed in the IPO prospectus as owning over 8% of the Class A common stock, is a big winner. Class A shares get 1 vote per share whereas Class B shares (held by the founders Tony Xu, Andy Fang and Stanley Tang) comprise 8% of the equity but get 20 votes per share. Share classes with different voting rights are common among tech stocks as they allow the founders to keep control of the company while holding a minority of the equity.
The Chairman of GIC, PM Lee, will of course be no stranger to dual share classes as his dad brought in the Newspaper and Printing Presses Act in 1971 which gives the PAP Government control of SPH through management shares which have 100 votes compared to the ordinary shares’ one. That of course gives the Government the right to appoint the Editors who often come to SPH as a pleasant perk after more onerous duties such as running the ISD, like the late President Nathan.
BT reports that GIC invested a total of US$155 million in the late stage financing rounds though the figure “does not include any investments in DoorDash’s earlier rounds”.If there was no earlier investment then that would be a spectacular return of over 3000% in about two and a half years. Presumably the champagne corks were popping at GIC on Wednesday! The lucky (presumably mainly expat) staff must be recalibrating their bonus calculations and wondering whether they can now afford a large landed property in District 10 or for the Americans a townhouse in Manhattan and an estate in the Hamptons. The expat staff would likely have to be paid on a par with their peers at other venture capital firms and so their remuneration might even approach Ho Ching’s (though she has to multitask between her job as CEO of Temasek, social media influencer and accompanying her husband on overseas trips so her duties are undoubtedly more onerous!). In 2019 Nikkei Asia said that Temasek was investing in DoorDash though there is no mention of Temasek in the BT report.
PM Lee is Chairman of GIC, as his father was before him. While he might not receive any direct remuneration for this role, it is legitimate to ask whether his access to information at GIC gives him the opportunity to invest his and his wife and family’s considerable wealth at the same time as GIC, either in a pooled vehicle or separately. Singaporeans are given no information as to how he manages his assets and whether they are put in a blind trust. It would be good to know that he is not able to profit unfairly from access to investment information and opportunities that come to him by virtue of his position and his wife’s position as head of Temasek. Because of the likelihood of huge conflicts of interest, he should not simultaneously be PM and Chairman of GIC just as his wife should not be CEO of Temasek. In 2017 I wrote about how his brother, Hsien Yang, was able to profit by investing in Razer Inc, a home-grown tech firm nurtured by Temasek and GIC, before its Initial Public Offering (IPO) in Hong Kong. I speculated as to whether he got the investment opportunity because of his connections. We need to know that the same thing does not happen with the PM and his wife or other members of the Lee family who might be cut in on what seems to have become a guaranteed profit.
There have also been some spectacular flops, like the workspace rental company WeWork, in whose Chinese subsidiary Temasek invested. In fact in March this year when markets fell by about 30% when it became clear the pandemic was much worse than estimated, many of Temasek’s and GIC’s investments in unlisted start-ups were probably under water. However there has been a spectacular recovery since then.
But whether the gains from these investments benefit Singaporeans is dubious to say the least. GIC manages money which the CPF Board lends to the Government long term. CPF holders receive between 2.5% and 4% on their CPF balances with a slightly higher interest rate on the first $60,000. Assuming they earned 3.5% over the last ten years their balances would have increased by 41%. During this period the S&P500 index has risen by close to 300%. The Government includes up to (but likely considerably less than) 50% of the estimated long-term (again we can be confident that the Government will deliberately underestimate this) returns of GIC, Temasek and MAS. However, as I have demonstrated, most of this money is saved and not spent, as it is transferred into new long term funds and trusts.
The one unchanging constant in all of this is that ordinary Singaporeans get a raw deal and the only people who benefit are the leadership and their spouses, relatives and cronies who are able to pay themselves billions to manage your money. This needs to change.