On Wednesday, World Bank President David Malpass slammed Microsoft’s $69 billion buyouts of gaming firm Activision Blizzard as problematic use of cash at a time when impoverished countries are fighting to restructure loans and combat COVID-19 and poverty.
During a virtual session hosted by the Peterson Institute for International Economics, Malpass stated that more capital needed to flow into impoverished countries, but that these flows have been hampered by abnormally cheap monetary policy in affluent countries.
He was taken aback by the size of Microsoft’s acquisition of “Call of Duty” developer Activision Blizzard. This far outstrips the $23.5 billion in cash donations agreed in December by wealthier donor countries to the International Development Association, the World Bank’s fund for the poorest countries – roughly $8 billion each year for three years, he said.
“You have to wonder, ‘Wait a minute, is this the optimal capital allocation?'” Malpass spoke on the Microsoft deal. “This is destined for the bond market. A lot of (capital) flows are moving to the bond market, you know.”
Microsoft’s all-cash acquisition announced on Tuesday would enhance its firepower in the expanding videogames market, where it competes with titans Tencent and Sony. It also reflects the American multinational’s bet on the “metaverse,” or virtual online worlds where people may work, play, and socialize, something that several of its largest competitors are already doing.
A relatively small section of the developing world has access to such bond financing, he continued, while too much capital remains trapped in industrialized countries, particularly in central bank reserve assets used to fund long-term bond purchases. Microsoft’s all-cash acquisition announced on Tuesday would enhance its firepower in the expanding videogames market, where it competes with titans Tencent and Sony.
It also reflects the American multinational’s bet on the “metaverse,” or virtual online worlds where people may work, play, and socialize, something that several of its largest competitors are already doing. A Microsoft spokeswoman did not immediately react to a request for comment on Malpass’ remarks from Reuters.
His remarks reflected a similar request made by central banks last week to reduce long-term bond holdings in order to free up lending capacity.
“This leads to a situation in which a great amount of capital is allocated to already capital-intensive portions of the world — the advanced economies — building more and more on top of already extensively built infrastructure and real estate, for example,” Malpass explained.
Meanwhile, a return to more normal global investment returns is required to increase financing capacity for small enterprises in emerging countries,” he said.
“In order to handle the refugee crisis, starvation, and other issues, more money and growth must go into underdeveloped nations,” Malpass concluded.