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Small investors are all the rage. US asset managers and brokers like Robinhood see opportunity in helping them access hot yet illiquid investments, while in the UK, officials are keen to develop a “mum-and-dad” investment culture akin to that of the US. But a transatlantic battle for a UK investment trust, which holds a sliver of SpaceX, shows that there is still some way to go.
Edinburgh Worldwide Investment Trust, which invests in cutting-edge technology both private and public, has been stalked by Boaz Weinstein’s Saba Capital for more than a year. In that time, Saba has twice been defeated in its efforts to restructure the board of the FTSE 250 trust and will take another run at it at an AGM in the coming weeks.
Ahead of this vote, EWI would like to offer its shareholders the chance to exit through a tender offer at virtually the full value of the fund’s assets, excluding SpaceX. Even if Weinstein were to win, he’d get his hands on a much smaller fund. Saba has also said it would push to offer an exit at net asset value, but given all the uncertainties ahead, it is fitting for investors to be given a choice regarding whether and when to take their money out.
The snag is EWI needs its retail investors to vote in favour of its proposal in order to be able to launch a tender offer. It has 24,000 of them, representing about half the shares. With Weinstein already holding a 30 per cent stake in the fund, EWI needs them to mobilise en masse.
That’s not entirely straightforward. Brokers haven’t always helped, as they’re not obliged to pass on all notifications from the trust — or Saba — to the investors whose shares they hold. They also offer different deadlines, some as early as a week before the April 8 close, to receive instructions to vote. If British policymakers really want an active retail investing culture, they should remove these frictions.
The EWI saga is complicated by its holding in SpaceX, a big lump of the fund’s value. Under the board’s proposal, investors who tender their shares and exit will be cashed out of that at the first opportunity. That’s probably from its hotly anticipated initial public offering, meaning they’d profit from the expected jump in its value on floating, but would have to invest directly or through other vehicles to keep exposure to it once it trades.
EWI’s small investors would probably have preferred to hold on to SpaceX through the fund, rather than have to replicate their exposure elsewhere. But given they will be doubling their money on it even at the proposed IPO valuation, few are likely to grumble too strongly. That is, if they can make it through the hassle of voting in the first place.
