Saba Capital has sought to deflect criticism of its third attempt to replace the board of Edinburgh Worldwide (EWI) by proposing a full cash exit near net asset value (NAV) for shareholders who don’t want to remain invested in the investment trust dominated by the activist hedge fund.
Saba, which holds just over 30% of shares in the £816m global smaller companies trust managed by Baillie Gifford, announced: “While we reiterate that the new board will be fully independent from Saba, we recognise that shareholders would like the choice not to continue with the company. Therefore, we recommend that the new directors, if elected, offer all shareholders a 100% cash exit at 99% of the Company’s NAV.
“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.”
James Carthew, head of investment company research at QuotedData, said: “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 also predicted EWI shares, which stand on a 6% premium to NAV, would fall back to a 6% discount if SpaceX achieves the $1.5trn valuation it is reportedly targeting in a flotation this year.
It said, “the unfortunate reality for shareholders is that we anticipate the discount will likely revert to near its prior levels once SpaceX is re-marked to its expected value.”
EWI holds 16% of its assets in Elon Musk’s rocket company which doubled in valuation late last year. Earlier profit taking by the fund managers earlier in the year sparked a row with Saba which accused the board and Baillie Gifford of selling its “crown jewels”.
Regardless of that dispute, shareholders last month voted against Saba’s resolution to nominate three new directors and sack the existing board. Despite that defeat, its second in a year, this week it said it would re-nominate the same individuals at the forthcoming annual general meeting.
Our view
Matthew Read, senior analyst at QuotedData, added: “We have long said that, having angered its fellow shareholders with its attempted landgrabs, Saba needs to rule out trapping other shareholders in strategies that they did not sign up for. We therefore welcome this announcement but cannot get away from the fact that EWI shareholders have had multiple opportunities to express their views and, to date, have consistently backed the incumbent board and manager.
“Beyond this, Saba is still inflicting costs on its fellow shareholders with its latest attack but is not offering anything new – it’s still the same board that lacks the relevant experience to manage a fund such as EWI and the same worn-out arguments that have been repeatedly debunked.”
