Boaz Weinstein is calling for the entire board of Baillie Gifford’s tech-heavy fund to be fired in a bid to reverse what activist investors describe as “unprecedented” value destruction.
In a letter to the board of Edinburgh Worldwide Investment Trust on Thursday, Weinstein said his activist investment firm, Saba Capital, owns about 30% of the trust’s shares, and that the board has “objectively and categorically failed” to deliver the results expected by shareholders.
London-listed Baillie Gifford’s website says EWIT’s portfolio consists of a global mix of small and emerging public and private companies focused on innovation and transformation, targeting “significant disruptive growth potential.”
The company’s holdings include Elon Musk’s Space Exploration Technologies (SpaceX), which accounts for 8.4% of the portfolio.
Weinstein said EWIT’s net asset value has fallen by 30.8% over the past five years, and its share price return has fallen by 35%, “significantly underperforming” its chosen benchmark, the FTSE All-Share Index, which has risen 71.4% over the same period.
This means the company’s NAV return and share price performance ultimately lags the benchmark by more than 100% over five years, Saba noted in the letter.
Edinburgh Worldwide Investment Trust.
“The scale of this value destruction is unprecedented among peer UK equity investment trusts over this period,” Weinstein wrote.
EWIT Chair Jonathan Simpson-Dent expressed disappointment with Mr 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.
“There is little point in judging a global small-cap trust against a UK all-share benchmark,” Simpson-Dent said in a statement, adding that EWIT’s total NAV return of 17.5% to date has outperformed the S&P World Small Cap Index’s 4.8%.
A Saba Capital spokesperson told CNBC: “EWI, in its latest 2024 annual report, compared company performance, particularly share price returns, to the 79-page FTSE All-Share Index and cited it as a ‘widely used performance measure for UK listed companies.’
A spokesperson said EWI’s share price returns have underperformed the FTSE All Share Index over one, three and five year periods, and underperformed the S&P World Small Cap Index over three and five year periods by “more than 60% over five years”.
“Constructive dialogue”
The trust’s total assets stood at 847.15 million pounds ($1.1 billion) as of October 31.
Mr. Weinstein is calling for a general meeting to appoint a new board consisting only of “qualified independent directors who are committed to delivering long-term value to all shareholders.”
“We remain deeply dissatisfied with the board’s prolonged inertia,” the same investors said in a letter Thursday. “We do not have confidence in the current board’s ability to implement the necessary strategic changes.”
Simpson Dent said EWIT’s board will continue to seek a “constructive dialogue” with Weinstein toward a “fair and holistic” solution that includes the return of capital. But he cautioned: “While we are willing to discuss the composition of the board with Mr. Saba, we strongly reject any proposal to replace the entire board and the associated opacity.”
He added: “As a result of the company’s actions over the last year, its tightly controlled discount rate now stands at 5.6%, which is significantly narrower than the global SME peer group’s weighted average discount rate of 10.9%.”
The move follows Saba’s attempt last year to revamp the EWI Trust Board, which ultimately failed to win support from investors.
Weinstein, who runs a $6 billion hedge fund based in New York, has recently held a number of positions across the UK investment trust industry.
He outlined two new bets at last week’s annual Son London Investment Conference, saying there was a “storm brewing” in the UK mutual fund sector with discounts widening rapidly.
