Certainly. What they're describing is a situation where, in an SOE, because the valuation of the company is based on asset value, the asset value could in some circumstances be higher than the enterprise value. Perhaps the stock of the publicly traded company has been depressed for some reason. Therefore, its book value or asset value is higher.
Our response would be that this is a theoretical concern. We can't say in every particular case that, yes, the enterprise value is higher than the asset value. What we have found through our analysis, as we've just discussed, is that in the majority of cases, because as well as going to enterprise value we're also increasing the threshold, there are going to be fewer cases that will run into this wall of having to have a review. As the threshold continues to increase—it starts at $600 million and goes to $800 million and then $1 billion and then is indexed to inflation thereafter—the chance of this happening will fall significantly as we go up each level.
As well, one of the reasons we looked at this is that Canada has trade obligations. We've taken reservations for the application of the Investment Canada Act, and one of the implications is that we can't make the act more restrictive than it currently is. The idea of an SOE staying at asset value and staying at its current threshold means we haven't made the act more restrictive. We're staying where we are. Switching to enterprise value, where we assume from the analysis we've done that enterprise value is usually higher than asset value, and yet staying at the same threshold of $344 million for state-owned enterprises puts us at a risk of going offside of that obligation not to make the Investment Canada Act more restrictive.
We're at a situation where we've maintained the SOE threshold for reviews where it was as per our trade agreements. At the same time, for private sector agreements, we are going to increase the threshold so that only the more significant transactions will be captured.