Edinburgh Worldwide (EWI) has launched a 100% tender offer as the trust looks to conclude its battle with Saba Capital.
In a similar proposal to those seen at Herald (HRI) and Impax Environmental Markets (IEM), EWI is falling on its sword to ensure unwilling shareholders are not trapped in a Saba-controlled vehicle.
The tender offer will provide shareholders with the opportunity to receive a significant cash exit close to net asset value (NAV). They will also retain access to the future value of rockets-to-satellites company SpaceX.
EWI’s largest holding is reportedly lining up a blockbuster IPO.
EWI’s board believes this is a key differentiator to Saba‘s recent proposal. This would force shareholders to either give up SpaceX or become trapped in a Saba-controlled trust.
EWI is ‘exhausted’
Chairman Jonathan Simpson-Dent said the board had ‘exhausted every reasonable and equitable solution’ with Saba. The activist hedge fund owns 30.1% of EWI’s shares.
Saba recently launched a third attempt to take control of the board. This was seen as a step to being appointed manager of the trust.
Simpson-Dent conceded the board has ‘reached the end of the road’ with Saba’s ‘continuing disregard’ for the wishes of other shareholders.
Not fit for purpose
Richard Stone, CEO of the Association of Investment Companies (AIC), also weighed in. Stone urged the Financial Conduct Authority (FCA) to take action on the Listing Rules to protect shareholders’ interests.
‘Unless the FCA steps up this could happen again and again and we could see more UK-listed companies disappear,’ warned Stone.
‘Saba’s attack on EWI could result in the disappearance of an investment trust which offers shareholders exposure to dynamic private companies like SpaceX. An activist investor should not be allowed to ride roughshod over shareholders and destroy much-valued investment trusts.’
Analyst views
QuotedData’s James Carthew commented: ‘EWI is pressing the self-destruct button and the countdown has begun. I understand why but deeply regret that it has come to this.’
Carthew continued: ‘Assuming that Saba does not tender its shares, shareholders who tender their shares can get 85% cash and 15% in a deferred interest in SpaceX.’
He explained that Saba and any other shareholders who don’t tender would end up with a much higher exposure to the other unlisteds. Private companies currently account for about 13% of the portfolio.
‘If Saba did tender its shares, there is a chance that the tender would have to be scaled back,’ said Carthew.
Winterflood’s Emma Bird views the proposal as well-placed to deliver the best outcome for all shareholders.
‘It provides to ability to capture further valuation upside from SpaceX, widely viewed as the fund’s “crown jewel” asset (including by Saba). Having said that, we think it is a shame this situation has ended this way,’ said Bird.
She described EWI as an example of a trust using the benefits of the closed-ended structure to its advantage.
These include a private companies allocation, a long-term investment horizon and the board’s commitment to shareholder interests.
Read the press release here: https://www.bailliegifford.com/en/uk/individual-investors/funds/edinburgh-worldwide-investment-trust/
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