UK Government urged to 'get to grips with threat' as Scottish drama intensifies |
The UK Government has been urged to 'get to grips with the threat' as the drama has intensified in a key sector in which Scotland has a major presence, writes Ian McConnell.
And this seemed like a big moment.
Scotland’s key investment trust sector found itself thrust into the spotlight again last week as US hedge fund manager Boaz Weinstein’s Saba Capital Management launched a third attempt to oust the board of a major fund.
Mr Weinstein launched his third campaign last Tuesday - only three weeks after his second attempt to remove all of the directors of Edinburgh Worldwide Investment Trust was defeated in a shareholder vote.
While this very short interval was somewhat remarkable, it was never in doubt that Saba was continuing to cast a shadow over Edinburgh Worldwide - which had total assets of around £861.59 million at December 31 - given its stake of around 30% in the trust.
And, of course, Saba had already returned for a second attempt after being defeated in its initial bid to oust the board of the trust, which is run from Edinburgh by Baillie Gifford, on February 14 last year.
It has seemed apparent for a long time now that there is no love lost between Edinburgh Worldwide and Saba.
And Mr Weinstein and Saba - even after their spectacular initial salvo ended with all seven of these attempts to oust the boards of UK investment trusts being rejected early last year - have made it crystal clear they are not going to be walking away from the sector. Quite the opposite – they have been exerting pressure on various funds in the period since the string of defeats in early 2025.
Saba again expressed dissatisfaction with the performance of Edinburgh Worldwide, which has Elon Musk's SpaceX as the single largest investment in its portfolio, as it launched its latest bid to oust the entire board last Tuesday, this time in an open letter to shareholders of the investment trust.
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Edinburgh Worldwide, when it was responding to Saba’s second attempt to remove its directors in the run-up to the January 20 vote in which the US hedge fund was defeated, highlighted the improvement in its investment performance over the past year and its significant outperformance of its benchmark over that period.
Saba is proposing the appointment to Edinburgh Worldwide's board of the same three individuals, Gabriel Gliksberg, Michael Joseph, and Jassen Trenkow, at the investment trust’s forthcoming annual meeting as it did last month. The US hedge fund said last Tuesday that it will propose these appointments as additional resolutions at the annual meeting and vote against the re-election of the existing directors.
Taking into account Saba’s shareholding, investors holding 53.2% of the Edinburgh Worldwide shares voted opposed the resolutions put by the US hedge fund to the January 20 general meeting.
However, excluding shares held by Saba, which requisitioned the general meeting of Edinburgh Worldwide investors held on January 20, shareholders representing 92.7% of the shares voted rejected Saba's proposals.
Ahead of the crunch vote on Saba’s second shot at ousting Edinburgh Worldwide’s board, Baroness Ros Altmann said last month: “Allowing a determined hedge fund to keep returning to the register until fatigue or low turnout hands it victory is not healthy shareholder democracy.”
This is a very good point.
Edinburgh Worldwide chairman Jonathan Simpson-Dent said last week in the wake of Saba’s latest move: “Only three weeks ago, a record 70% of shareholders participated in the second vote in less than a year, with an overwhelming majority (93%) of non-Saba holders again rejecting its proposals. Despite this strong shareholder opposition to Saba taking control, Saba is evidently choosing not to listen and has, again, chosen not to engage with the board.”
He added that the board will “update shareholders on its plans ahead of the company's AGM”, which has to be held by the end of April.
Amid the drama, the Association of Investment Companies revealed on Thursday that it had written to the Financial Conduct Authority (FCA) and the Department for Business and Trade “calling for action to protect retail shareholders’ interests”, declaring: “This follows Saba Capital’s repetitive attacks on Edinburgh Worldwide Investment Trust.”
And AIC chief executive Richard Stone made some very good points as he set out the industry body’s thinking and practical measures which surely deserve a hearing.
He said: “It’s time for the regulator and Government to get to grips with the threat that Saba poses and act to support UK companies. Is it fair that an investment trust needs to achieve repeated record turnouts to avoid Saba taking control against the wishes of the vast majority of all other shareholders? How can shareholders make an informed decision when individuals nominated for election to the board are silent on their intentions for the company and do not subject themselves to shareholder scrutiny? Why can an activist force repeated votes on the same proposals in such a short space of time?
“There should be a limit to the number of times a meeting can be requisitioned by the same shareholder making similar proposals. The current legislation does not give boards sufficient powers to stop the same proposals being brought forward repeatedly by a single shareholder when they have already been rejected. This creates a distraction and cost to the detriment of other shareholders.”
Mr Stone declared “directors must represent all shareholders”.
He added: “Our priorities for voting reform therefore include changing the related parties rules so that directors nominated by a significant shareholder must win the support of other shareholders, excluding the significant shareholder, to be elected.”
As the Saba drama intensified last week, the AIC’s urging of the UK Government to “get to grips with the threat” seemed like a big moment.
While it is difficult to tell where things will go from here, one thing that seems certain is there will be plenty more drama in coming weeks on Edinburgh Worldwide and Saba.