Saba Capital thanks EWIT shareholders after rejection of tender offer

(Sharecast News) - Activist investor Saba Capital thanked shareholders of Edinburgh Worldwide Investment Trust on Monday after they rejected the company's "deeply flawed" proposal for a tender offer.

EWIT announced on Friday that shareholders had voted against the tender proposal, which it had put forward in order for shareholders to cash out at close to fair value and retain access to the potential future value from SpaceX.

Cash from that sale would have been returned in early May, while trust manager Baillie Gifford would have sold EWIT's shares in SpaceX whenever possible. Of EWIT's �728m of assets under management, SpaceX accounts for 16.3%.

Of the total votes cast, 46.2% voted in support of the tender offer resolution and 53.8% against.

EWIT said on Friday that the votes against "were made almost entirely by Saba and two other institutions".

New York-based Saba has made repeated attempts to oust the EWIT board, having criticised its performance and the sell-down by Baillie Gifford of the company's stake in SpaceX - which it has referred to as "the crown jewel" of the portfolio - just two months prior to SpaceX's scheduled revaluation.

Saba, EWIT's largest shareholder with a stake of around 30%, said on Monday: "We thank our fellow shareholders for their support in rejecting the EWI board's deeply flawed tender proposal, which would have forced shareholders into untradeable SpaceX tracker shares while exposing them to significant potential tax liabilities.

"The board's failure to put forward a well-thought-out tender that the majority of shareholders are willing to support makes it clear that chair Jonathan Simpson-Dent and his fellow directors are completely out of touch with their own shareholders."

It noted that over the past five years, EWIT's performance has been "unacceptable by any objective measure", ranking 66th out of 66 equity trusts with more than �500m in assets.

"Yet instead of taking responsibility for the company's last-place performance, the board continues to pursue actions that maintain the status quo and prioritise the incumbent directors' self-interests at the expense of shareholders' financial interests," it said.

Following Friday's vote, Saba said it remains confident that its previously announced enhanced liquidity proposal - which is dependent on the election of a new board of its choosing - is the best outcome for shareholders.

The proposal would give shareholders three options: tender immediately and exit at net asset value less costs; tender following a potential SpaceX IPO; or retain their investment in the company.

Saba said the new directors it has put forward for election at the upcoming annual meeting "possess the investment management and board experience necessary to administer this proposal, which would offer shareholders greater optionality, more effective management of any tax consequences and the ability to see the SpaceX position through to IPO".

It encouraged all EWIT shareholders to vote for its three nominees - Gabriel Gliksberg, Michael Joseph and Jassen Trenkow - and reject the re-election of the incumbent directors at the upcoming meeting.

Saba also said it would not support any further proposals from the EWIT board ahead of the AGM, arguing that it would be "irresponsible for the board to waste shareholders' time and money pursuing another tender offer".

"The incumbent directors have a track record of poor judgement, flawed governance and weak oversight of Baillie Gifford's management of the SpaceX position, which included the inexplicable decision to sell 35.4% of the investment in October 20252 at an obviously low valuation," it said. It pointed out that this decision cost EWIT shareholders around �86m, or 10.8% of the current NAV.

EWIT chair Jonathan Simpson-Dent said after the vote on Friday that the outcome was "very disappointing", particularly given the continued strength of support from independent shareholders who have consistently rejected Saba's plan for control.

He said there remains a "high likelihood" of Saba succeeding in appointing its proposed new board at the AGM on 30 April. This would likely lead to a change in manager and a fundamental shift in the company's strategy and investment mandate, he said.

In a statement on Monday, EWIT said it is now critical that shareholders vote in "record numbers" at the upcoming AGM in favour of all board resolutions and against Saba's resolutions to appoint its nominees.

Simpson-Dent said: "It is extraordinary that Saba has now chosen to block its own proposal which it claims it is still endorsing. This complete contradiction lays bare the fact that Saba cannot be trusted to follow through on its own commitments, even where those commitments were made publicly to shareholders.

"Saba has cynically claimed the board is out of touch with shareholders, yet Saba has never taken the time to engage with retail shareholders or the majority of institutional shareholders, despite repeated invitations. A significant number of shareholders have once again expressed their desire not to be in a Saba-controlled vehicle.

"Saba's actions are not about improving outcomes for all shareholders; they are about control. Saba's announcement today makes that unequivocally clear. If its nominees were appointed, there can be no confidence that any stated intentions would be honoured."

He said shareholders face a clear choice: to protect the company's independence and long-term strategy or risk handing control to a party "whose actions have demonstrated inconsistency, opportunism and disregard for shareholder clarity".

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