Edinburgh Worldwide Investment Trust (EWIT) has conceded defeat to Saba Capital, bringing its 17-month long battle with the US hedge fund to an end. In its annual general meeting (AGM) update released on Thursday morning, the investment trust admitted that it expects there will be “insufficient votes” in favour of the resolutions relating to the re-appointment of the five independent directors standing for re-election.
Saba-Backed Nominees Likely to Gain Control
Instead, EWIT anticipates that the resolutions to appoint three Saba Capital backed nominees to the board will be approved. This will bring to an end the tenure of chair Jonathan Simpson-Dent, alongside four others as directors of the company. EWIT said the outcome reflects “a material reduction” in ownership by private wealth and retail shareholders, who opted to pull capital before Saba took effective control.
The trust noted that the selloffs were also from “previously engaged shareholders who had historically voted in support of the board”, meaning the number of those in favour have declined dramatically since Saba’s last attempts to gain control. Additionally, a US investment fund with a material holding in EWIT also voted against the board, bringing the number of US investment fund shareholders not supporting to four. Including Saba, this collective represents more than 40 per cent of the company’s issued share capital.
Reactions from the Board and Industry
Jonathan Simpson-Dent, chair of Edinburgh Worldwide Investment Trust, said: “This is a disappointing day for our long-standing shareholders who are set to lose exposure to this exciting mandate focused on next-generation technology, seemingly in favour of Saba’s plan to invest in other UK investment trusts.” He added that retail and private wealth shareholders have been “ground down by Saba’s repeated attacks” and that a significant number have already chosen to exit the company, replaced by institutions seeking to capture the upside potential in EWIT’s substantial SpaceX exposure.
Simpson-Dent expects more retail and private wealth shareholders to follow suit, noting that this outcome should “be a wake-up call for the investment trust sector and its regulators.” Richard Stone, chief executive officer of the Association of Investment Companies, also expressed disappointment, arguing for a change in listing rules to prevent minority shareholders from being able to take control. He said: “The bigger picture here is that a minority shareholder has been able to control the future direction of an investment trust against the wishes of the vast majority of other investors who did not want this outcome.” Stone emphasised the need for changes to Listing Rules and voting legislation to ensure all shareholders receive information and voting rights they are entitled to.
End of the Road for the Battle
The conclusion comes after shareholders twice rejected Saba’s attempts to overthrow the board, which left the trust no choice but to offer shareholders an exit strategy. EWIT had urged investors to support the tender offer in an attempt to wind up the trust before the AGM to stop Saba seizing the 130 year-old vehicle, but shareholders backed Saba’s alternative proposal. The alternative granted the trust’s investors an option to exit at the full value of their holdings in the coming weeks or after the IPO of SpaceX. Meanwhile, Edinburgh Worldwide’s board offered shareholders the opportunity to realise all their investments bar the SpaceX portion, which would be returned to them at a future liquidity event such as its awaited public market debut before the trust would be wound up.
Industry-Wide Implications
The hedge fund has also set its sights on several struggling trusts in the past 18 months, causing alarm bells to ring across the industry. This development highlights vulnerabilities in the investment trust sector and raises questions about shareholder rights and regulatory oversight.
