Key facts
- Saba, holding a 30% stake in Edinburgh Worldwide (EWI), blocked a proposed tender offer.
- The tender offer would have allowed shareholders to exit at net asset value (NAV) before potential board changes.
- EWI's board intends to proceed with a tender offer the week of April 20, unless Saba withdraws support.
- Saba criticized EWI's board for allowing Baillie Gifford to sell some SpaceX shares.
- EWI's SpaceX holding represents 20.4% of its assets, valued at $1.25 trillion.
- The Association of Investment Companies called for legislation to curb disproportionate influence by minority shareholders.
Activist hedge fund Saba has successfully blocked a proposed tender offer by Edinburgh Worldwide (EWI) that would have allowed shareholders to exit the investment trust at net asset value (NAV). The vote, which occurred at a general meeting on Friday, saw Saba and two other institutions vote against the board's proposal. EWI's board had sought to offer shareholders an exit before Saba's attempt to replace the board with its own nominees at the annual general meeting on April 30.
EWI chair Jonathan Simpson-Dent expressed disappointment, stating that the outcome demonstrated how a determined minority shareholder could exert disproportionate influence. He noted that Saba's success in appointing its proposed board at the AGM was now highly likely, which would likely lead to a change in manager and investment strategy.
The dispute intensified as EWI's board attempted to compromise by offering tender opportunities, including one following a potential SpaceX IPO or liquidity event. However, Saba called this move "irresponsible" and stated it would waste shareholders' time and money. Simpson-Dent countered that Saba's actions were contradictory and showed a lack of trustworthiness.
Saba has also criticized EWI's board and its manager, Baillie Gifford, for selling some of its SpaceX holdings in October. Saba estimated this move cost shareholders £86 million, or 10.8% of NAV, based on a potential $1.75 trillion valuation for SpaceX's flotation. EWI and other Baillie Gifford-managed trusts have increased their valuation of SpaceX to $1.25 trillion, with further gains anticipated if SpaceX achieves its IPO valuation. EWI shares fell 3.2% following the vote.
The Association of Investment Companies has called for legislative changes to prevent large minority shareholders from wielding such influence, with chief executive Richard Stone highlighting that Saba's vote deprived other shareholders of an exit opportunity.