Boaz Weinstein is calling for the removal of the entire board of a tech-focused fund managed by Baillie Gifford, in a bid to reverse what the activist investor sees as “unprecedented” value destruction.
In a letter to the Edinburgh Worldwide Investment Trust’s board on Thursday, Weinstein — whose activist investment firm Saba Capital owns around 30% of shares in the trust — said the board has “objectively and categorically failed” to deliver the performance expected by shareholders.
EWIT’s portfolio comprises a global mix of smaller and emerging public and private companies focused on tech innovation and transformation, that target “significant disruptive growth potential,” according to the London-listed Baillie Gifford’s website.
Its holdings include Elon Musk’s Space Exploration Technologies, or SpaceX, which makes up 8.4% of its portfolio.
Weinstein said EWIT’s net asset value is down 30.8% over the past five years, while its share price return has fallen 35%, having “massively underperformed” its self-selected benchmark, the FTSE All-Share Index, which is up 71.4% over the same period.
That means the company’s NAV return and share price performance ultimately lag the benchmark by more than 100% over the five-year period, Saba noted in the letter.
Edinburgh Worldwide Investment Trust.
“The magnitude of this value destruction is unprecedented among peer U.K. equity investment trusts over this period,” Weinstein wrote.
Jonathan Simpson-Dent, chair of EWIT, expressed disappointment with Saba’s open letter.
He said EWIT’s benchmark is the S&P Global Small Cap Index — not the FTSE All-Share Index cited in Weinstein’s letter.
“It makes little sense to judge a global small-cap trust against a U.K. all-cap benchmark,” Simpson-Dent said in a statement, adding that EWIT’s NAV total return has been 17.5% to date, ahead of the S&P Global Small Cap Index’s 4.8%.
A Saba Capital spokesperson told CNBC: “In its latest 2024 Annual Report, EWI compared company performance, specifically share price return, to the FTSE All-Share Index on page 79 citing it as ‘a widely used measure of performance for UK listed companies’.”
The spokesperson said that EWI’s share price return has underperformed the FTSE All-Share Index on a one-, three- and five-year period, and the S&P Global Small Cap Index on both a three- and five-year period, “including by more than 60% over the five-year.”
‘Constructive dialog’
The trust’s total assets stood at £847.15 million ($1.1 billion) as of Oct. 31.
Weinstein is calling for a general meeting to appoint a new board composed solely of “qualified, independent directors… committed to delivering long-term value for all shareholders.”
“We remain profoundly frustrated by the board’s prolonged inertia,” the activist investor wrote in the letter on Thursday. “We do not have faith in the current Board’s ability to implement the necessary strategic changes.”
Simpson-Dent said EWIT’s board will continue to seek “constructive dialog” with Weinstein toward an “equitable and holistic” solution, including return of capital. But he warned: “While we are open to discuss Board composition with Saba, we would strongly reject any proposal to replace the entire Board and the ambiguity that would follow.”
He added: “The company’s actions over the last year have supported a tightly managed discount, currently 5.6%, significantly narrower than the Global Smaller Companies peer group weighted average discount of 10.9%.“
The move follows an earlier attempt by Saba last year to shake up the EWI trust’s board, a bid which ultimately failed to win investor support.
Weinstein — whose New York-based $6 billion hedge fund trades credit relative value opportunities — has built a number of positions across the U.K. investment trust space lately.
Outlining two new bets at the annual Sohn London investment conference last week, he said there is “a storm brewing” in the U.K. investment trust sector where discounts have widened sharply.
