The Association of Investment Companies (AIC) has written to the FCA and the Department for Business and Trade (DBT) calling for action to protect retail shareholders’ interests. This follows Saba Capital’s relentless attacks on Baillie Gifford-managed Edinburgh Worldwide (EWI). The US activist holds just over 30% of the global smaller companies trust.
Defend shareholders’ rights
The AIC’s letters suggest measures to defend shareholders’ rights and ensure a fair and democratic process. It argues there should be a limit to the number of times a meeting can be requisitioned by the same shareholder making similar proposals.
| Share price: 236p | Total assets: £848m |
| Market cap: £816.3m | Premium to NAV: 5.9% |
Richard Stone, CEO of the AIC, said: ‘It’s time for the regulator and government to get to grips with the threat that Saba poses and act to support UK companies. Is it fair that an investment trust needs to achieve repeated record turnouts to avoid Saba taking control against the wishes of the vast majority of all other shareholders?’
Deflecting criticism
Saba has tried to deflect criticism of its third attempt to replace EWI’s board by proposing a full cash exit near net asset value (NAV). This would suit shareholders who don’t want to stay invested in the trust if Saba takes control.
Earlier this week, Saba called for yet another vote to replace the incumbent board of directors with three new choices at an upcoming AGM. Its preferred picks are Gabriel Gliksberg, Michael Joseph and Jassen Trenkow.
Saba said: ‘Regardless of any future changes the new directors may elect to make to EWI’s investment mandate or manager, this tender offer would guarantee every shareholder the option to sell their entire holding at 99% of NAV – providing a clear and certain path forward.’
The activist continued: ‘No amount of quibbling over benchmark selection can obscure the facts. Under Baillie Gifford’s stewardship, EWI has lost more than 40% over the past five years – despite largely being invested in technology stocks during one of the strongest tech markets in history.’
Rocket fuel
Saba also predicted EWI shares would fall back from an NAV premium to a 6% discount if SpaceX achieves the $1.5trn IPO valuation it is reportedly targeting. The trust holds 16% of its assets in Elon Musk’s rocket company.
Earlier profit-taking by the fund managers sparked a row with Saba. The hedge fund accused the board and Baillie Gifford of selling its ‘crown jewels’.
James Carthew, head of investment company research at QuotedData, commented: ‘We would expect to see a cash exit at asset value given that the supposedly independent new board has almost certainly already made up its mind to appoint Saba as manager, but that doesn’t do anything for investors like me that actually want to be invested in global small cap growth.’
Saba’s claim that SpaceX is the ‘defining asset’ in EWI’s portfolio is hard to dispute. It is only right Saba has ruled out trapping other EWI shareholders in strategies they did not sign up for.
EWI shareholders have consistently backed the incumbent board and manager. Isn’t it about time Saba got the message?
Read the press release here: https://www.theaic.co.uk/aic/news/press-releases/aic-act-now-to-protect-investors-from-sabas-repetitive-attacks
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