Controversial US hedge fund Saba Capital is likely to take control of the board of Edinburgh Worldwide at the trust’s annual general meeting (AGM) later today.
The board announced in a regulatory filing that there will be “insufficient votes in favour of the resolutions relating to the re-appointment of the five independent directors standing for re-election”, based on the latest voting information.
“It is also expected that the resolutions to appoint Saba Capital Management’s three nominees to the board will be approved by the requisite majority,” the statement read.
Jonathan Simpson-Dent, chair of Edinburgh Worldwide, said it was a “disappointing day” for shareholders. The mandate will change from one focused on investing in next-generation technology companies to one that will invest in other UK investment trusts.
It is the third time Saba has attempted to oust the board and gain control of the investment trust. The latest requisition comes shortly after the US hedge fund’s attempts to oust the board were shot down by the majority of investors in January.
“I would like to thank shareholders for their engagement and support,” said Simpson-Dent.
The chair noted that retail investors had been “ground down” by Saba’s “repeated attacks”, adding that a significant number had already sold their shares. This made it more difficult to win the latest voting round, as the shares had been snapped up by institutions looking to capitalise on the trust’s largest holdings – SpaceX – which is expected to list at a premium rating in the US this year.
James Carthew, head of investment companies QuotedData, said the majority of sold shares had been bought up by three other US investment funds, who likely did not have to disclose their positions as their stakes were not large enough.
“It would be fascinating to know what they think is the benefit of buying EWI very close to asset value and handing it over to Saba's nominees. They could have captured any possible upside from SpaceX without changing the board,” he said.
The assumption now is that the new board will oust the incumbent fund managers and hand over the reins to Saba Capital.
However, Richard Stone, chief executive of the Association of Investment Companies (AIC), noted that the board has “important legal and regulatory responsibilities to act independently” and that before any changes of manager or mandate are considered, “shareholders should be given opportunities to exit, both before and after a potential SpaceX IPO”.
“Saba has made various proposals about what should happen if its nominated directors are appointed. However, these are matters for the board. We call on the new board to make clear their intentions and plans as soon as possible so that all shareholders can have confidence in their approach,” he said.