Saba Capital Launches Bid to Remove IEM Board Amid Investor Exodus
US hedge fund Saba Capital is making a bold move to oust the entire board of directors at investment trust Impax Environmental Markets (IEM), as a significant number of investors race to exit their positions. This aggressive action marks the latest chapter in an ongoing power struggle within the investment trust sector, where Saba has been actively targeting underperforming funds.
Shareholder Letter Outlines Demands for Board Removal
In a letter distributed to shareholders on Monday, Saba Capital formally outlined its plans to requisition a general meeting with the explicit purpose of removing IEM's current board. The hedge fund stated its intention to appoint a completely new board composed solely of qualified, independent directors who could implement necessary strategic changes.
Saba expressed being profoundly disappointed with IEM's financial performance over the past five years, noting that the trust's share price had lagged behind its benchmark by more than 75 percent. The fund criticized the board's inability to improve the status quo and implement crucial strategic adjustments that could enhance shareholder value.
Massive Shareholder Exodus as Defense Mechanism
IEM revealed on Monday that nearly four-fifths of its shares had been tendered for sale after the trust offered investors an opportunity to cash out. This defensive move was prompted by fears that Saba Capital would attempt to gain control of the trust, despite the majority of investors having backed IEM in a continuation vote just last year.
Investors representing just under 78 percent of shares had accepted the cash-out offer as of Monday, a figure that apparently includes the majority, if not all, of Saba's 22 percent stake in the company. While this move will crystallize immediate profits for shareholders, Saba argued in its letter that the scale of shares tendered demonstrated little demand for the company to continue operating in its current state.
Board Chairman Acknowledges Difficult Situation
IEM Chairman Glen Saurez addressed the challenging circumstances, stating there were no winners in this situation. He described navigating the varied desires of different shareholders as extraordinarily difficult, particularly given that the overwhelming majority had voted in favor of IEM's continuation just twelve months earlier.
Saurez explained that Saba made its disagreement clear in subsequent interactions with the chair, prompting the board to act proactively by offering an exit to all shareholders who wished to take it. This defensive measure was intended to balance shareholder interests while addressing the threat of a potential takeover.
Broader Pattern of Investment Trust Activism
Saba Capital's move against IEM represents part of a broader pattern of activist investing targeting investment trusts. The hedge fund, led by New York financier Boaz Weinstein, has previously targeted other trusts including Edinburgh Worldwide Investment Trust (EWIT), pushing chairs and boards to the brink to prevent Saba from taking complete control.
In a parallel development, EWIT has issued a rallying call to investors to fight off Saba at its upcoming annual general meeting on April 30. Saba is seeking to use the trust's AGM to remove the EWIT board and replace them with Weinstein's handpicked nominees, mirroring its strategy with IEM.
EWIT Chairman Jonathan Simpson-Dent has urged shareholders to make their voices heard to stop the hedge fund's power play, highlighting the growing tension between activist investors and traditional investment trust boards across the sector.
