Crystal Amber (CRS ), the AIM-listed activist investor, is considering whether to wind up and return £128m of assets to shareholders or reconstruct the fund after losing its own battle with an activist US investor.
The 13-year-old Guernsey investment company, whose fund manager Richard Bernstein has waged campaigns against IP developer Allied Minds (ALML), banknote printer De La Rue (DLAR) and Hurricane Energy (HUR), met its match on Monday when it lost a shareholder continuation vote.
Although just over half of the votes cast were in favour of the fund continuing, it failed to reach the 75% threshold required to pass the extraordinary resolution at the annual general meeting.
The result was not a shock as Saba Capital, a New York-based activist founded by former star derivatives trader Boaz Weinstein, had said in June it would use its 26% stake to vote against.
After spiking 2% today in response to Monday’s late afternoon announcement, shares in Crystal Amber eased 0.5% to 120.4p on a 22% discount to their estimated net asset value (NAV) of 153.1p, according to Numis Securities.
Weinstein (pictured), who made up to $300m when JP Morgan lost over $6bn in its infamous ‘Whale’ trade on credit default swaps nine years ago, and other investors, including Merseyside Pension Fund, CG Asset Management and Charles Stanley broking clients, can look forward to an uplift on their holdings if the wide discount narrows while the company sell its assets and returns capital.
Crystal Amber noted that excluding Saba and one other US hedge fund, which shorted De La Rue and Allied Minds shares to hedge their position, more than three-quarters of investors had voted for the company to carry on.
‘The articles [of association] now require the fund to formulate proposals to reorganise, reconstruct, or wind up the company. In the coming weeks, the fund intends to provide shareholders with specific proposals. It is currently envisaged that these will centre around the continued realisation of assets and increasing capital returns to shareholders,’ Crystal Amber stated.
The fund believes it can pay out at least £40m, or 50p a share, before 30 June 2022, with more to follow.
It says it has been in talks with potential trade buyers for its five main strategic holdings – De La Rue, currency trader Equals Group (EQLS), Hurricane Energy, medical device manufacture GI Dynamics and Allied Minds – which account for 89% of NAV. It will provide an update on its 18.1% shareholding in Allied Minds next month.
Although shares in the 4%-yielder have shot up 40% in the past year, in the longer term, Crystal Amber has been a disappointment, returning 86% over a decade, according to Numis data, below the 114% of an underperforming UK stock market.
The share price discount widened in 2019 when fund managers Neil Woodford and Mark Barnett, who had held around a third of Crystal Amber, were forced to sell as investors pulled out of their poorly performing funds.
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