This morning, I woke up to a news article about how activist...

This morning, I woke up to a news article about how activist investor Tribeca was pressuring mining giant Glencore to run their company in terms of stock exchange listings and structures.

The newspaper article summarized a letter from Tribeca to the company.

It struck me as a little ironic given Tribeca’s track record on the structure they have chosen for their own ASX LIC listing.

I thought the newspaper article about this offered a reasonable template to what potentially TGF ASX shareholders might write to Tribeca themselves.

Below is a quick edit I made this morning of such a template.

WHAT TRIBECA’S LONG-SUFFERING SHAREHOLDERS MIGHT SAY

Activist investor Tribeca’s long-suffering shareholders are pressuring listed Invesment company Tribeca to ditch its ASX closed end fund structure in favour of the open-ended fund structure.

In a letter to Tribeca’s board, the long-suffering shareholders say the company’s share price has underperformed its peers and the changes it suggests could unlock the company’s intrinsic value. Similar claims against MGF ASX, EAI ASX, WLS ASX, APL ASX to name some only, have been successful in recent times.

Long suffering TGF ASX shareholders were drawn to the LIC in part from their stated goal “The Company seeks to generate a compound annual return in excess of 15 per cent after fees and expenses whilst preserving capital over the long term (five years-plus).”

“Asset rationalisation, bourse adjustment and the optimisation of capital returns are all suggestions we have made to Tribeca,” the letter says. “Having largely followed these, the likes of MGF ASX, EAI ASX, WLS ASX, APL ASX, just to name some, have largely closed the gap to NTA.”

Tribeca’s long-suffering shareholder’s say that since listing on the ASX in October 2018, the total return TGF ASX had provided to shareholders, including dividends, has been NEGATIVE 5.9 per cent PER ANNUM. This is being somewhat kind, as it assumes shareholders did not invest more into TGF ASX via a massively dilutive capital raising last year. The offer was made at $2.10 at a then 21.64% discount to the post tax NTA of $2.68. Shares at the time of writing now trade at $1.45 in mid-March 2024.

Tribeca’s long-suffering shareholders says it’s opposed to massively dilutive capital raisings at huge discounts to NTA, when the fund is producing negative returns versus a stated goal of 15% per annum.

Tribeca’s long-suffering shareholders says shifting TGF ASXs primary structure from closed end to open ended - offered it a higher valuation in line with NTA.

“The closed end structure is no longer the appropriate forum for TGF ASX shares,” the letter says.

On March 8th TGF ASX shares closed at $1.46, the corresponding after tax NTA from this date was $2 a share, meaning the discount was 27%. About a year ago, the massively dilutive capital raise had the goal of helping close such a discount. To quote from the AFR at the time Tribeca claimed “LICs with more liquidity tend to trade at a premium and that was the feedback we were getting from our shareholders and advisers that this transaction, albeit at a discount, would increase the likelihood we’d have more daily liquidity and interest and that will help,”

In last year’s TGF ASX AGM the Chairman’s address was saying:

“The Board has also reviewed the structural optionsavailable to TGF to address the discount issue and we have concluded that theavailable options are either infeasible, available only at a potentiallyprohibitive cost to shareholders, or both. In summary:

• Because TGF’s portfolio includes assets that do notoffer daily liquidity, the “quoted fund” option is not available to us;

• Delisting TGF would simply transform it into anunlisted company with no ready market to enable TGF’s shareholders to accessliquidity; and

• Converting TGF into an unlisted unit trust wouldgenerate transactions costs and potentially have tax consequences which we havenot attempted to assess.

The key points above are that the transaction and taxconsequences have not been attempted to be assessed by the board.

Also that assets that do not offer daily liquidity, areonly a very small part of the portfolio.

Lastly, why not give the owners of the company a choice?– perhaps they view and would vote differently, given they do not benefit frommanagement revenue fee income like the board of directors has in the past here.