Wall Street magnate warns of legal action against UK fund over SpaceX stock sale

Wall Street Investor Challenges UK Fund Over SpaceX Stake Reduction

Boaz Weinstein, head of Saba Capital Management, has emerged as a prominent critic of several investment trusts listed in the UK. Recently, he has threatened legal action against one of the country’s largest investment trusts after it reduced its holding in Elon Musk’s SpaceX.

Weinstein described the partial sale of Edinburgh Worldwide Investment’s prized SpaceX shares as lacking sound business sense. The trust, chaired by Jonathan Simpson-Dent, sold more than a third of its SpaceX position in October, just before the company’s valuation doubled to $800 billion (£593 billion) in December from $400 billion in July.

Edinburgh Worldwide Investment (EWI), valued at £850 million and managed by Baillie Gifford since 1998, focuses on backing innovative, fast-growing businesses. Between September and October, EWI’s stake in SpaceX dropped from 13% to 8.4%.

Weinstein has called for greater transparency from the trust’s board, suggesting the sale was intended to facilitate a merger with a competing trust—a claim EWI denies. He warned that if Saba does not receive adequate answers regarding the transaction, it may initiate legal proceedings on EWI’s behalf.

In a letter criticizing the board, Weinstein stated, “Selling EWI’s most significant holding at a price well below its current value, without consulting shareholders, is clearly unacceptable.”

Activist Campaigns and Boardroom Battles

Over the past year, Weinstein has become a leading voice against several UK-listed investment trusts, launching campaigns through Saba at nine different closed-end fund boards to challenge their performance.

Although his efforts to secure board seats for Saba were ultimately unsuccessful, pressure from the hedge fund led at least five of the nine trusts to either restructure or wind down last year.

Saba claims that EWI’s sale of SpaceX shares resulted in a loss of approximately £37 million for shareholders and was tied to an unsuccessful attempt to merge with Baillie Gifford’s US Growth Trust. Weinstein’s fund blocked this merger in December, citing concerns that it would allow Baillie Gifford to retain management of the trusts while forcing Saba to halt its activist efforts.

Saba has consistently criticized Baillie Gifford for what it sees as underperformance, while Baillie Gifford has accused Saba of attempting to take control of EWI.

Shareholder Stakes and Merger Implications

Saba has accumulated significant holdings in both EWI and the US Growth Trust, owning 25% and 28% respectively. According to Saba, the merger would not have been feasible without the SpaceX share reduction, as the combined trust’s SpaceX position would have exceeded 20% of total assets, potentially disqualifying it from favorable tax treatment under UK rules.

Upcoming Vote and Leadership Dispute

Weinstein, who founded Saba Capital in 2009 after a career at Deutsche Bank, is known for his sharp investment instincts. He was among the first to spot the “London Whale” trading opportunity and once placed third in a poker tournament hosted by Warren Buffett, winning a Maserati despite not having a driver’s license.

EWI has announced a Q&A session for shareholders to address questions about Saba’s proposals. Saba is seeking to replace all six of EWI’s independent non-executive directors with three of its own US-based nominees. However, independent adviser ISS has recommended that shareholders reject all of Saba’s resolutions at the upcoming general meeting on January 20.

Jonathan Simpson-Dent urged shareholders to vote against Saba’s proposals, warning that failing to do so could allow the US hedge fund to gain control of the company at a low price.

An EWI spokesperson criticized Saba’s campaign, accusing the hedge fund of spreading misinformation to advance its own interests at the expense of other shareholders. The spokesperson added that the trust looks forward to addressing shareholder concerns and clarifying Saba’s claims regarding SpaceX at the upcoming Q&A session.