Over half of Smithson’s (SSON) shareholders have opted to take cash rather than roll their investment into Smithson Equity Fund.
In November, the company announced plans to convert from an investment trust to an open-ended fund.
The board hoped this bold move would eliminate a stubborn discount to net asset value (NAV). Activist Saba Capital and Fundsmith founder Terry Smith both backed the plan.
| Share price: £14.38 | Discount to NAV: 7.3% |
| Market cap: £1.5bn | Total assets: £1.7bn |
Smithson stock was unchanged at £14.38 today. The shares were suspended on 11 February after 99% of shareholder votes approved the liquidation, but the open-ending process is not entirely complete so a second general meeting is scheduled for 27 February.
Cashing out
Smithson said holders of 58.64% of its shares elected to take cash. With the trust’s latest NAV at £15.35, Fundsmith stands to lose more than £967 million of assets under management (AUM).
Fundsmith’s AUM has reduced in recent years as its quality-growth approach has struggled.
Tried-and-tested
With 41.36% of shareholders opting for the rollover some £682 million of assets will transfer to Smithson Equity Fund.
Simon Barnard will continue to manage the global small-and-mid cap portfolio using his well-understood investment approach.
Smithson’s restructuring was prompted by Saba’s appearance on the shareholder register, which forced the board to take action.
The chairman’s view
As chairman Mike Balfour said on 10 February: ‘The proposals eliminate the persistent discount to NAV at which the shares have traded in recent years’.
In addition, they offer ‘a choice to shareholders of either continuity for those who wish to access the same investment strategy with the same management team or the alternative of a full realisation of their investment close to NAV.’
Smithson’s strategy of owning a concentrated portfolio of quality growth companies is out of favour.
However, Barnard argues being different from the market could be ‘useful diversification for shareholders when this particular environment changes’. As such, the new Smithson Equity Fund will be one to watch.
Read the press release here: https://www.smithson.co.uk/news/
