Will The Write Down Of Investment In FTX Have Adverse Effect On Temasek?

Regardless of the outcome of FTX’s file for bankruptcy protection, Temasek has made the decision to write down the entirety of its investment in FTX due to FTX’s financial situation.

Background of investment in FTX

In the statement on FTX published on its website, Temasek has invested:

• US$210 million for a minority stake of ~1% in FTX International

• US$65 million for a minority stake of ~1.5% in FTX US

This was across two funding rounds from October 2021 to January 2022, and the cost of such investment was 0.09% of the net portfolio value of $403 billion as of 31 March 2022.

Since the investment in FTX which is an investment into cryptocurrencies, has been considered a misperception, they clarified that there is no direct exposure in cryptocurrencies currently.

Due diligence processes

Temasek has conducted an extensive due diligence process on FTX, which took approximately 8 months from February to October 2021. During this time, they found FTX’s audited financial statement to be profitable.

In addition, Temasek’s due diligence efforts focused on the associated regulatory risk with crypto financial market service providers, particularly licensing and regulatory compliance (i.e. financial regulations, licensing, anti-money laundering (AML)/ Know Your Customer (KYC), sanctions), and cybersecurity. 

They also interview people familiar with FTX, including employees, industry participants, and investors. They admitted their due diligence processes can curb certain risks, but it is not practicable to avoid all risks.

At the end of the statement, the Singapore state firm said that there are inherent risks when making an investment, divesting, or holding assets, and wherever it is operated. While this write-down of investment in FTX will not have any significant impact on their overall performance, Temasek treats any investment losses seriously and there will be learnings for them from that.

They will continue to remain prudent and exercise caution even as they explore opportunities that are aligned with their structural trends, to deliver sustainable returns over the long term for the overall portfolio.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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