Herald Investment Trust (HRI) has announced plans to launch a tender offer allowing shareholders to realise up to 100% of their shares at close to NAV. The move is aimed at resolving ongoing tensions with activist investor Saba Capital, which holds approximately 30.7% of the company.
The Board says the tender offer gives shareholders a clear choice: either remain invested with Herald’s long-standing manager, Katie Potts, and its existing mandate, or exit their investment on fair terms. The offer will be structured via a realisation pool, with those not participating continuing in a vehicle free from the disruption that has dogged the company over the past year.
The proposal comes after two failed attempts by Saba to replace the Board and alter the company’s strategy. Although a significant minority holder, Saba has consistently found itself in opposition to the overwhelming majority of other shareholders – most recently at January’s requisitioned general meeting, where just 0.15% of non-Saba votes supported its proposals.
Conditions and backstop protection
The proposed tender offer is conditional on shareholder approval and on Saba tendering all or substantially all of its shares. If this condition is not met, the Board says it will proceed with a Backstop Tender Offer that only requires a simple majority to pass, ensuring shareholders still have the opportunity to exit before any possible change of control.
Chairman Andrew Joy commented: “It is not sustainable to do nothing given the risk that Saba, through attrition, may eventually win a simple majority. This proposal offers a full and fair choice: to stay with Herald’s proven investment approach or exit at close to NAV.”
The Board has confirmed that none of its directors nor the manager will tender their shares in the initial tender offer, but will participate in the backstop offer if Saba blocks the first.
Long-term performance and manager support
Despite the conflict, Herald has continued to perform strongly. The trust has delivered a NAV total return of 907% since April 2009 (Saba’s inception) and 2,956% since its own launch. By comparison, the Saba Capital Master Fund has returned 151% since inception.
Over the last 3 years, Herald’s NAV total return is 31%, and 8.6% over the 12 months to 31 December 2025. The Board believes Herald remains well positioned, citing attractive valuations in small-cap technology and communications names, and long-term secular growth trends in areas such as AI, cyber security and defence.
Shareholder friction and market impact
The Board notes that the ongoing shareholder friction has inhibited the manager’s ability to deploy capital into smaller, less liquid opportunities – traditionally Herald’s strength – and is deterring new investors.
The tender offer is designed to reset the shareholder base, allowing aligned investors to remain and the manager to return to its unconstrained approach. The proposal also helps protect shareholders from a future scenario where Saba could gain control without providing an exit to others.
If implemented, the tender offer will be funded by allocating a pro rata portion of the company’s assets to a Tender Pool, which will be wound down in an orderly fashion. Shareholders who do not participate will remain invested in a Continuation Pool, and will not bear any of the tender costs.
Further details and voting instructions will be provided in a shareholder circular expected shortly.
Matthew Read, senior analyst at QuotedData, said: “We have long said that Saba has effectively painted itself into a corner by amassing such a large stake in Herald given the less liquid nature of the majority of the trust’s underlying holdings. By doing so, Saba has created a stalemate that has threatened to paralyse one of the UK’s longest-standing and most successful small-cap tech investment trusts.
“We think that Herald’s board is right to recognise the threat that Saba poses to other shareholders and welcome its proposed tender offer as it puts the choice firmly in the hands of shareholders – stay with a proven manager and strategy, or exit cleanly at NAV. The Backstop Tender Offer ensures that no shareholder can be left stranded in a vehicle under Saba’s control, unless they want to be, although the scale of Saba’s previous defeats suggest that this will not be the preferred option. We think this is a smart move on the part of Herald’s board that protects non-Saba shareholders, and one that other boards will take note of.
“Ultimately, Herald is a trust with solid long-term performance and a highly experienced manager. Saba’s attempts to seize control have been a distraction and are costing its shareholders money. However, assuming the Saba situation can be resolved, there’s every reason to think Herald can return to focusing on what it does best – capturing the benefits of long-term growth in niche TMT names.”
James Carthew added: “Saba’s response to Herald’s proposals will finally make its intentions clear to investors in all UK investment companies. If it blocks the tender, it will be proof that its real goal is to find ways of trapping investors in funds that it can extract management fees from. Shrinking Herald is bad news for small cap tech companies but this is a boil that needs to be lanced.”
