Edinburgh Worldwide goes nuclear with exit plan after Saba battle – what does it mean for investors?

Edinburgh Worldwide Investment Trust (EWIT) has urged its shareholders to vote for a proposal to implement a 100 per cent tender offer, to draw a line under its battle with Saba.

EWIT said Saba’s ‘continued campaign’ left EWIT’s board of directors ‘no alternative but to propose an exit solution.’

Chair Jonathan Simpson-Dent says the board had ‘exhausted’ every avenue with the activist hedge fund led by Boaz Weinstein, which owns 30.1 per cent of its shares.

The trust says its tender offer is superior to Saba’s because it gives shareholders exposure to any further rises in SpaceX, after which shareholders would receive a further cash payment.

It is the latest, and possibly final, move in the showdown between EWIT and Saba. It comes two months after EWIT’s shareholders rejected the US hedge fund proposal to merge it with another Edinburgh-based trust, Baillie Gifford US Growth. 

Simpson-Dent said: ‘We have reached the end of the road with Saba’s obsession to break the status quo and its continuing disregard for the expressed wishes of other shareholders.’

What does it mean for investors?

As part of EWIT’s proposal, investors would keep access to EWIT’s largest shareholding, SpaceX, by preserving exposure until a ‘future liquidity event’.

After this, shareholders would receive a further cash payment, a move EWIT called ‘regrettable but necessary…to protect shareholders from being trapped by Saba.’

The tender offer would see EWIT shareholders receive around 85 per cent of the invested capital in cash at close to net asset value after the trust liquidates its assets.

They’d receive a further 15 per cent based on the realised value of SpaceX, once that has crystallised, presumably after an IPO.

SpaceX comprises 16.6 per cent of Edinburgh Worldwide’s £758.3million assets.

Dan Coatsworth, head of markets at AJ Bell, said: ‘Edinburgh Worldwide is royally fed up with meddling from activist investor Saba and has now gone for the nuclear option – offering a deal for all shareholders to cash out at close to fair value.

‘If all investors take up the offer, the investment trust would sell its holdings, return the money and potentially call it a day.’

He added: ‘A lesson from the past few years is that nothing is straightforward when it comes to activists and investment trusts. This is Edinburgh’s third attempt at fighting off Saba, and there is no guarantee it will go smoothly.’

James Carthew, head of investment company research at QuotedData, said EWIT had pressed the ‘self-destruct button’.

‘Assuming that Saba does not tender its shares – and reports suggest that it will not –shareholders who tender their shares can get 85 per cent cash and 15 per cent in a deferred interest in SpaceX.

‘Saba and any other shareholders who don’t tender would end up with a much higher exposure to the other unlisteds, which currently account for about 13 per cent of the portfolio. If Saba did tender its shares, there is a chance that the tender would have to be scaled back.’

The Association of Investment Companies has called on the FCA to be more proactive in preventing a situation like this again.

Chief executive Richard Stone said the current rules ‘are not fit for purpose because they allow a minority shareholder to repeatedly attack an investment trust.

‘Unless the FCA steps up this could happen again and again and we could see more UK-listed companies disappear.’