Scottish Mortgage (LSE:SMT) shares were firm favourites with retail investors towards the end of the pandemic. The investment trust offered exposure to fast-moving technology stocks and retail investors loved it. The stock kept rising on the momentum… until it plummeted.
It’s gets nowhere near as much interest as it used to. And that’s a shame, but it’s a really interesting and exciting fund with a nice mix of public and private holdings. Right now, the most consequential of those positions is a single holding that makes up 15.4% of the entire portfolio: SpaceX.
That weighting is based on SpaceX’s last private transaction in December, which valued the company at $800bn. But here’s the thing — given that public market holdings like TSMC, ASML, Amazon and Nvidia have all fallen in the recent sell-off, while the SpaceX position continues to be marked at that December private valuation, the weighting has almost certainly crept higher since February.
The trust’s exposure to Elon Musk’s rocket company is its biggest single bet by some margin.
IPO maths
Musk wants to take SpaceX public at a $1.75trn valuation. That compares to the $800bn at which it was last valued in December — so we’re talking about a 119% uplift on the position. Worth doing the maths.
Scottish Mortgage’s SpaceX stake currently sits at around £2.3bn, or roughly 16% of a total portfolio of £15.2bn. At the IPO valuation, that holding would be worth closer to £5bn — pushing the overall portfolio to around £17.9bn. One stock. An 18% increase in NAV.
In per-share terms, that means NAV moves from 1,232p to around 1,455p. And remember, you can currently buy Scottish Mortgage shares at 1,181p — a discount to today’s NAV, let alone what it might be if the IPO goes ahead.
None of this is guaranteed. Private-to-public transitions are rarely straightforward, and Musk has a habit of moving goalposts.
What’s more, this maths isn’t perfect, and I’ve ignored fluctuations elsewhere.
But as a potential catalyst, it’s hard to ignore.
It’s not all SpaceX
Beyond SpaceX, the portfolio reads like a who’s-who of transformational businesses: TSMC at 6.6%, Stripe at 3.9%, MercadoLibre at 4%, Nvidia at 3.2%, Meta at 3%.
There’s also a holding in Anthropic (the company behind Claude and Cowork), which personally I find one of the most exciting positions in the trust, even if I wish the weighting were larger.
Great opportunity but risks remain
Scottish Mortgage uses gearing — borrowing to amplify its positions. In a bull market, that can amplify gains. In a correction, like the current one, it works in reverse, exaggerating losses as asset values fall. It’s not a reason to avoid the trust, but it is a reason to size the position accordingly and hold your nerve.
For long-term investors comfortable with volatility, Scottish Mortgage offers something quite unique. It’s a liquid, ISA-eligible route into some of the world’s most consequential private companies and some of the most exciting public companies.
The SpaceX story alone makes it worth considering, I believe.
