Edinburgh Worldwide’s tender offer proposal to shareholders has been defeated thanks largely to opposition from activist investor Saba Capital Management (Saba).
The vote took place at Edinburgh Worldwide’s (LON:EWI) (EWIT) General Meeting on 10 April.
The proposal would have offered shareholders in the investment trust a chance to tender their shares at close to current net asset value (NAV) while retaining exposure to any future upside in the event of an IPO for the trust’s top holding, Elon Musk’s SpaceX.
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Of the total votes cast, 46.2% of shares were voted in support of the tender offer resolution and 53.8% against.
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Saba Capital and two other institutional shareholders accounted for the vast majority of the votes against the proposal, which constituted 36.8% of the total issued shares in the trust. Saba owns approximately 30% of EWIT’s shares.
EWIT’s board indicated that it will now pursue the tender offers that Saba has previously suggested it will recommend, which would give shareholders two windows to tender their shares at close to NAV: the first being soon after the upcoming Annual General Meeting (AGM) and the second following a potential SpaceX IPO or liquidity event.
“The vast majority of non-Saba shareholders wanted the tender offer proposed by the board,” said Richard Stone, chief executive of the Association of Investment Companies, an industry body representing UK-listed investment trusts. “They have also indicated – twice – that they do not want to be trapped in a Saba-controlled vehicle.”
Why is Edinburgh Worldwide proposing share tender offers?
EWIT’s tender offer had been proposed as an exit ramp for investors that didn’t want to become trapped in a Saba-controlled investment trust – something that the board had seemingly accepted as an inevitable eventuality.
“Faced with this reality, the Board's priority is to ensure shareholders can still exercise their right to a meaningful choice,” said Jonathan Simpson-Dent, chair of Edinburgh Worldwide.
Saba’s latest proposal to displace EWIT’s board will be voted on at the trust’s AGM, which is scheduled for 30 April.
Should voting patterns follow those at the latest requisitioned general meeting then the AGM could see Saba’s nominated appointees take over the trust.
See also: Saba launches investment trust ETF.
Saba won’t support Edinburgh Worldwide tender offers
On 30 March, Saba indicated that it would recommend that the board of directors it has nominated – should they be voted in at the upcoming AGM – give EWIT shareholders three options:
- Option 1: Tender immediately and exit at NAV less costs.
- Option 2: Tender following a potential SpaceX IPO or liquidity event – but prior to any potential change in investment mandate – at NAV less costs.
- Option 3: Retain their investment in EWIT.
On 13 April, however, Saba said in a statement that it retains confidence this proposal is the best outcome for shareholders, but also that it will not support any further proposals from EWIT’s board ahead of the AGM. EWIT had said that it would advance the further tender offer as soon as 20 April if Saba supported it.
Saba’s statement said “it would be irresponsible for the board to waste shareholders’ time and money pursuing another tender offer before the AGM” and criticised Baillie Gifford’s management of the trust, particularly a recent selloff of SpaceX shares at well below the $1.75 trillion valuation it is reportedly seeking at an upcoming IPO.
Saba estimates this selloff could cost EWIT shareholders £86 million, or 10.8% of current NAV.
EWIT’s board claims it is contradictory for Saba to withdraw support for the offer whilst still claiming to favour it.
“It is extraordinary that Saba has now chosen to block its own proposal which it claims it is still endorsing,” said Simpson-Dent.
EWIT’s board has previously pointed out that the directors Saba has nominated are ostensibly independent, and that there is therefore no guarantee that they would execute the proposal Saba has recommended if voted in at the AGM.
