Activist investor Crystal Amber (CRS) has received a letter from Saba Capital, a shareholder that owns more than 25% of the fund, saying that it will be voting its shares against continuation in the vote that is due to take place at the AGM this year. Because CRS needs a minimum of 75% of shareholder approval to continue, this means that Saba Capital is effectively blocking the fund’s continuation. CRS’s board expects that the next AGM will be held at a similar time to last years, ie in late November 2021.
CRS’s board says that, at the last AGM, it noted the diversity of voting in respect of certain resolutions including the continuation of the share buyback authority. Since this time, CRS has consulted widely with its shareholders and the board says that, in the light of the letter from Saba Capital, will continue to do so. In particular, the board will be looking to formulate proposals to reorganise, reconstruct, or wind up the Company following the Continuation Vote not being passed at the next AGM.
How did we arrive at this point?
At an EGM held on 30 July 2013 a resolution was passed that, following the thirteenth anniversary of the CRS’s launch (in 2008), at the Annual General Meeting to be held in 2021, an Extraordinary Resolution, that would require a 75 per cent. majority, would be proposed that the Company continue as constituted (this being the continuation vote). If such a resolution was to be passed, a similar resolution would be proposed at every second annual general meeting thereafter. If the resolution were not passed at any of those meetings, the Directors would be required to formulate proposals to be put to the shareholders to reorganise, reconstruct, or wind up the Company.
About Crystal Amber
Crystal Amber is an activist fund taking stakes in undervalued companies and taking action to enhance value. The Fund originates ideas from its screening processes and its network of contacts, including its shareholders. Companies are valued with focus on their replacement value, cash generation ability and balance sheet strength. During the process, the Fund’s goal is to examine the company both ‘as it is’ and under the lens of ‘as it could be’ to maximise shareholder value. Investments are normally made after an initial engagement, which in some cases may have been preceded by the purchase of a modest position in the company, to allow the Investment Adviser to meet the company as a shareholder. Engagement includes dialogue with the company chairman and management, and normally also several non-executive directors, as CRS’s manager seeks to build a network of knowledge around its holdings.
[QD comment: In an ironic twist, the activist is now on the receiving end of activism, but perhaps this is not surprising given that Crystal Amber is trading at a discount in excess of 20%. In reality, this situation was not sustainable. This does not mean that the fund could not continue in some form if those shareholders that wish to exit get the opportunity, allowing the register to be cleaned up. However, with a market cap of currently around £85m, it is debateable whether there would be enough assets left over, after dissenting shareholders have exited, to keep the fund viable. Perhaps it is time to offer shareholders the opportunity to roll over into one of the other UK small cap funds, that actively engages with shareholders.]