Investment trust professionals have been caught off-guard by US activist investor Saba Capital’s latest move against the board of Impax Environmental Markets (IEM).
Yesterday, the board had announced the results of its exit tender offer, during which it had concluded that Saba had tendered “the majority, if not all, of its position”.
However, according to a press release from the hedge fund earlier today, Saba expects to be the beneficial owner of interest in approximately 29.9% of shares after the tender – higher than its initial stake.
James Carthew, head of investment companies at QuotedData, said: “Honestly, we are as confused as everyone else about the new Saba announcement.
“Today, Saba says it has a 29.9% stake – more than it had before the tender – but it appears to be saying so by press release rather than a notification to the market as it would be required to do.”
See also: IEM and EWIT consider their futures as the battle with Saba rages
In a letter to other shareholders of IEM, Saba reflected on its “profound” disappointment with the performance of the trust and the board’s “inability” to make the necessary changes to the status quo.
They highlighted the underperformance of the trust over the past three and five years, where it had lagged the MSCI ACWI over both periods.
“Against this backdrop, the scale of the shares tendered (77.83%) in the recent exit tender offer makes clear there is little demand for this company to continue in its current state,” a spokesperson said.
The US activist argued that “any board would ordinarily step aside following this result” and has called for the board’s resignation.
The largest shareholder intends to requisition a general meeting to remove the current board and replace it with a new board of “qualified, independent directors”.
See also: ‘A disappointing outcome’: Edinburgh Worldwide shareholders reject tender offer
QuotedData’s Carthew, reflecting on Saba’s announcement added: “As Saba says, the “the scale of the shares tendered… does indeed make it… clear there is little demand for this company to continue in its current state” because the “current state” that Saba is referring to is one where there was a threat of it being in charge – that is what investors were fleeing from.”
If the US hedge fund genuinely owns almost 30% of the remaining trust, then it will probably win, he noted, as any investors who failed to turn out to the initial vote are unlikely to participate.
“Maybe it’s time to move onto the next phase of the saga”, he added. “One where a new set of supposedly independent directors are forced to justify their actions and face potential legal repercussions if they don’t act in all shareholders’ best interests.”
