Saba Capital Management (Saba), a US-based activist investor hedge fund, has been defeated in its attempt to displace the board of Edinburgh Worldwide Investment Trust (EWIT).
In November, Saba requisitioned a general meeting of Edinburgh Worldwide (LON:EWI) shareholders that took place this afternoon (20 January), where shareholders voted on Saba’s proposals to replace the investment trust’s board with three independent directors it had selected.
As well as what it described as persistent underperformance and stubborn discount to net asset value, Saba also questioned EWIT’s sell-down of its SpaceX holding. It argued that the stake in Elon Musk’s space exploration company had been trimmed at far below its potential value (assuming a $1.5 trillion IPO next year) in order to facilitate a merger with Baillie Gifford US Growth (LON:USA).
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Saba’s proposals were overwhelmingly defeated. In total, 53.2% of votes cast were against the proposals. Excluding Saba’s votes, 92.7% of votes were cast against the proposals.
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“For the second time in less than a year, Edinburgh Worldwide's shareholders have voted decisively to reject Saba's proposal to install its own nominees to the Board and the uncertainty that would have entailed,” said Jonathan Simpson-Dent, chair of Edinburgh Worldwide.
Shareholders representing more than 70% of issued share capital voted on the resolutions – a record shareholder turnout.
Shareholder advisory services ISS and Glass Lewis had both recommended that shareholders oppose the proposals ahead of the vote.
What does Edinburgh Worldwide defeat mean for Saba?
Saba has been building its position in other closed-ended funds, having recently pushed for a managed wind-down of real estate investment trust Workplace Group (LON:WKP).
But the string of defeats it has now suffered, including two consecutive votes at Edinburgh Worldwide, could make it hard to justify continued attention in the UK investment trust sector.
Two other trusts in which Saba has built up a significant stake – Herald Investment Trust (LON:HRI) and Impax Environmental Markets (LON:IEM) – have pre-empted any attempt to challenge their management by proposing a share tender at close to NAV that would be contingent on Saba tendering (materially) all of its shares.
“Saba remains our largest shareholder and we will continue to seek constructive engagement with them to develop potential solutions that allow us to move forward,” said Simpson-Dent.
He added, though, that “following a year of significant and costly distraction, we are ready to return our full attention to our primary purpose: investing in innovation, transformation, and exceptional potential in a way that respects the clear wishes expressed by the majority of shareholders both last February and again today”.
