The board of the Victory Park Capital Specialty Lending (VSL) investment trust is under pressure to to rethink its recommendation to back a continuation vote for the fund at its annual shareholder meeting on 24 June.
Staude Capital, which owns 2.3 per cent of the alternative finance-focused fund, has written an open letter questioning the board’s return targets.
The shareholder has previously said it supports the manager and its investment strategy but is unhappy with the large discount to net asset value (NAV) and said the status quo cannot continue.
If shareholders back a continuation vote, the board is offering an exit opportunity for up to 100 per cent of the shares in issue immediately following the meeting in 2023 if the NAV for the three-year period is less than 18 per cent.
It is also offering an exit opportunity for up to 25 per cent of the shares in issue immediately following the company’s 2023 meeting if the average discount to NAV at which the shares trade over the four-week period ending on 31 March 2023 is greater than 15 per cent.
But a second open letter from Staude Capital said shares were already trading at just below a 15 per cent discount three months ago, which the board has described as disappointing at the time.
“We ask that the board reassesses its current position and brings forward a new set of proposals for shareholders to vote on,” the letter said.
“Proposals that include reasonable return targets for the company and which have a genuine prospect of solving the company’s longer-term structural discount problem.
“If the board fails to bring forward different proposals, we will have no alternative but to vote against continuation and will feel compelled to publicly advocate for this outcome.
“This will be despite us having a favourable view of the manager and its investment strategy.”
The VSL board last week defended the fund’s performance since shifting from marketplace to balance sheet lending in 2017 and was reassured by the investment manager’s risk mitigation measures during the coronavirus pandemic.
It said it remained committed to narrowing the discount to NAV through share buybacks, adding that it would be reduced in less volatile markets.
Analysts at brokerage Numis said Staude Capital doesn’t have enough shares to sway the vote but it could influence others.