ISS Supports Saba Capital’s Case for Change at ASA Gold and Precious Metals Limited
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Insights
The advocacy by Institutional Shareholder Services (ISS) for changes within the Board of ASA Gold and Precious Metals Limited reflects a significant sentiment that there exists a misalignment between the current board's decisions and shareholder interests, specifically regarding the persistent discount to Net Asset Value (NAV). This recommendation from ISS holds weight in the investment community and can influence shareholder votes, potentially altering the company's strategic direction.
A deeper analysis of the market's reception to such advisory endorsements reveals that they often precede notable shifts in governance practices, which can, in turn, impact stock performance. If elected, new board members may bring a fresh perspective to ASA's strategic approach, potentially leading to reforms in corporate governance and asset management strategies. Consequently, this could affect the Fund's discount to NAV, ultimately realigning the stock price closer to its perceived true value.
ISS's stance on board composition and its critique of defensive strategies like the adoption of a poison pill can signal to investors that there may be a lack of effective checks and balances within ASA's current management. The poison pill serves as a mechanism to thwart takeover attempts by diluting the potential acquirer's stake, sometimes at the cost of shareholder value. This could be indicative of a board more focused on maintaining control than on maximizing shareholder returns.
Future financial performance of ASA could be impacted by the outcome of the board election. The new nominees' experience in asset management and corporate governance improvements suggests potential for a strategic refocus, which might involve a more aggressive approach to narrowing the discount to NAV. Should these nominees be elected and their strategy be successful, this could lead to improved investor confidence and potentially drive up the share price, enhancing shareholder value in the long run.
The mention of 'seemingly unlawful poison pill' raises legal red flags that might be of concern to stakeholders. While the term 'poison pill' is a defensive strategy often used by companies to prevent hostile takeovers, the adjective 'unlawful' indicates that ISS questions the legal validity of such an action. Investors should be aware that legal disputes or the revocation of such measures can result in material changes to the power dynamics within a company, potentially leading to volatility in the stock's market performance.
Moreover, if governance practices are deemed to be disenfranchising shareholders, legal ramifications could ensue, adding a layer of risk to investments in ASA. Shareholders and potential investors should closely monitor the outcomes of these boardroom dynamics, as they could have far-reaching implications on both the company's governance and its financial health.
Recommends ASA Shareholders Vote FOR the Election of Saba Nominees Ketu Desai and Paul Kazarian on the GOLD Proxy Card and Withhold Votes for the Incumbent Directors
Cites the Board’s “Unjustified Defensive Maneuvers” and ASA’s “Persistent Discount to NAV” Under Their Stewardship
Concludes the “Board Positioned Itself on the Leading Edge of Disenfranchising Shareholders”
In its full report, ISS affirmed Saba’s case for boardroom change and noted concerns with ASA’s adoption of a seemingly unlawful poison pill:1
- “In adopting the poison pill, the board positioned itself on the leading edge of disenfranchising shareholders…”
- “These unjustified defensive maneuvers provide further evidence of a disconnect between the board and shareholders.”
- “…ASA has consistently traded at a wider discount to NAV than the CEF universe as a whole (ASA is currently in the bottom decile).”
- “…the board has also espoused a puzzling perspective on the discount to NAV that should further alarm investors.”
- “…ASA has stated that it does not have a duty to manage the discount. It is unclear what ASA hopes to accomplish by adopting this position…”
ISS also highlighted the qualifications of Saba’s director candidates:
- “…[Paul] Kazarian is a logical addition, given that he is a principal of the dissident, the fund’s largest shareholder.”
- “Electing dissident nominee Desai, in addition to Kazarian, would help achieve needed board independence, and Desai’s asset management experience and service on other CEF boards further strengthen his candidacy.”
- “[Saba] has also articulated a plan, which includes making corporate governance improvements and exploring a more flexible approach to managing assets.”
Paul Kazarian, Partner and Portfolio Manager of Saba, commented:
“We are pleased that ISS agrees change is necessary in ASA’s boardroom. ISS shares our concerns with ASA’s long-term underperformance, the Board’s inability to oversee advisor Merk Investments and the incumbents’ entrenchment maneuvers, including the adoption of a poison pill. The fact that Axel Merk and the current Board remain completely unwilling to acknowledge the duty they have to rein in the Fund’s significant discount to NAV only reinforces the urgent need for new directors in ASA’s boardroom.
Shareholders deserve a Board that will protect their rights and take action to enhance shareholder value. In our view, the best path to address ASA’s persistent discount to NAV, rebuild trust with shareholders and improve the Fund’s flawed governance practices is through the election of all four of Saba’s highly qualified nominees at the upcoming Annual Meeting.”
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As a reminder, Saba has nominated four director candidates – Ketu Desai, Frederic Gabriel, Garry Khasidy and Paul Kazarian – for election to the Fund’s Board at the 2024 Annual Meeting, which is scheduled to be held on April 26, 2024. To support shareholder-driven change, vote on the GOLD Proxy Card for all four of Saba’s highly qualified director candidates.
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About Saba Capital
Saba Capital Management, L.P. is a global alternative asset management firm that seeks to deliver superior risk-adjusted returns for a diverse group of clients. Founded in 2009 by Boaz Weinstein, Saba is a pioneer of credit relative value strategies and capital structure arbitrage. Saba is headquartered in
1 Permission to quote ISS was neither sought nor obtained.
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Longacre Square Partners
Greg Marose / Kate Sylvester, 646-386-0091
gmarose@longacresquare.com / ksylvester@longacresquare.com
Source: Saba Capital Management, L.P.
FAQ
Why did ISS recommend shareholders vote for Saba's director candidates at ASA Gold and Precious Metals ?
Who are the Saba director candidates recommended by ISS?
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