Investors in one of Scotland’s top trusts can look forward to a big pay day next month when it begins to sell down part of its holding in Elon Musk’s SpaceX.
Tom Slater, manager of the Scottish Mortgage Investment Trust, told its AGM that trading rules meant it could not liquidate part of its 19.3% holding when the rocket and satellite company floated on Nasdaq last month.
But after the Q2 results in August, 20% of its stake will be available for sale. If the share price is above a certain level it could sell 30%.
“There are further time-based unlocks for the remainder of the holding so our position would become liquid gradually over the next six months,” said Mr Slater.
“It is unusual in the history of the trust to have such a concentrated position in one stock and we will seek to address that.”
Analysts and investors have been attempting to work out the true value of SpaceX since its shares went public at $135 on 11 June. They began trading the following day at $150, and immediately took off. On 16 June, they closed at $201.80 giving the company a market capitalisation of $2.6 trillion, making it the sixth-largest in the world.
The stock is now trading at about $157, bringing it back down to its $2.1trn IPO valuation.
Mr Slater was asked at its AGM about the impact on the trust of a potential collapse in the valuations of the US tech giants, particularly the so-called Magnificent Seven.
He sought to downplay such an outcome. “Over the last 10 years the winners have kept on winning,” he said. “It is not about who will win, but how long will they keep on winning.”
On the likelihood of a bubble bursting, he replied: “I am not sure I would agree with the premise. What you see is a lot of spending [by the tech giants]. They can afford it.”
He added that while Elon Musk’s company was its biggest holding, he said SMIT was invested broadly and was backing those with a clear market path in disruptive technologies.
“We believe that five or ten years from now our companies will have competitive advantage,” he said.
SpaceX had been the “stand out” investment and it was “rare to see a business that has both the scale of opportunity and the market dominance that SpaceX enjoys”.
He said it was reducing its costs of getting rockets into orbit and was making them re-usable.
“What people have not grasped is that it changes space from somewhere you visit occasionally to somewhere you go to build infrastructure.”
This could mean establishing bases on the moon. “There are many more Earth-based services that can be delivered from this infrastructure,” he said.
Chairman Christopher Samuel was asked about the possibility of SMIT being subject to the sort of investor raid which saw the board ousted at Edinburgh Worldwide Investment Trust following sustained campaign by Saba Capital Management which had built up a large shareholding.
“We have talked about that issue, as you would expect,” he said. “The FCA has set out a consulation. We have been extremely active in buybacks and preventing that sort of presence on the register that would disadvantage all shareholders.”
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