(Update of article published yesterday) Baillie Gifford has hiked its valuation of SpaceX by 87% according to updates published by four of its investment trusts yesterday. This includes flagship Scottish Mortgage, which saw its net asset value (NAV) jump by a remarkable £1bn in one day
Citing a “trigger event that required an upwards adjustment” in the valuation, Scottish Mortgage Trust (SMT) said SpaceX now accounted for 15.3% of net assets, up from 8.2% of the portfolio at 30 November. That’s an increase of 87%.
The uplift in SpaceX pushed Scottish Mortgage’s NAV per share to £12.97 on Monday, an increase of 92p from Friday. That values the portfolio of global growth companies at £14.1bn, up £1bn from £13.1bn at the end of last week.
According to our calculations, that makes Scottish Mortgage’s stake in SpaceX worth nearly £2.2bn, up from £508m in September, an increase of more than four-times in just three months.
The FTSE 100-listed investment trust and its three stablemates made no reference to the $1.5trn (£1.1trn) valuation that SpaceX was reportedly seeking for a flotation next year. However, last week, in response to criticism from Saba Capital’s founder Boaz Weinstein over reductions in the Saba position by Edinburgh Worldwide (EWI) and Baillie Gifford US Growth (USA), Baillie Gifford said press speculation did not form part of its process.
SpaceX share sale the catalyst
Broker Winterflood said the fund group’s move followed the reported completion of a SpaceX insider tender offer letting staff sell their share at an $800bn valuation, double the $400bn valuation set in July, which itself was a mark up from the $350bn valuation a year ago.
Edinburgh Worldwide and Baillie Gifford US Growth – whose proposed merger 30%-holder Saba blocked last week – made similar announcements. EWI’s holding in SpaceX has leaped from 8.5% to 15.9%. Its NAV rose £56.2m on Monday to £735.6m with its stake in SpaceX advancing to £125.9m from £64m.
US Growth’s exposure to SpaceX has nearly doubled from 6% to 11.4%, with the portfolio enjoying a one-day £39.1m increase to £856.7m. Its investment in SpaceX has jumped £47m this month to £97.7m.
It’s the same with Schiehallion (MNTN), the £1.3bn private equity fund, where SpaceX now accounts for 14% of net assets up from 7.5% two weeks ago. In all four trusts the increase in the holdings is 87%, indicating SpaceX’s valuation has gone up that much.
Baillie Gifford declined to comment or explain why the holdings had not doubled if the SpaceX tender offer $800bn valuation was the catalyst. It’s possible that the value of SpaceX had already increased a bit since July.
Winterflood analyst Shavar Halberstadt said: “We look forward to hearing the managers’ substantive view on the valuation, as the willingness of SpaceX employees to cash out at a high valuation should not be the sole determinant of the company’s intrinsic value.”
Shares in all four trusts have made further small gains of up to 1.3% in the case of Scottish Mortgage.
Unquoted caps breached
While the increase in SpaceX will be welcome by shareholders in the trusts who have had a torrid time over the past five years, there is a sting in the tail for Scottish Mortgage and Edinburgh Worldwide.
SpaceX’s valuation jump means they will have exceeded their 30% and 25% limits on unquoted holdings. While they will not have to sell any, they will not be able to make additional investments in unlisted companies. This makes a SpaceX flotation attractive to both as it will push them back below the caps.
Weinstein’s attack
The good news on SpaceX also leaves Baillie Gifford open to questions from Saba Capital. Weinstein renewed his criticism of Edinburgh Worldwide and Baillie Gifford US Growth cutting their stakes in SpaceX ahead of the merger proposal which Saba has blocked. Saba has requisitioned a general meeting of shareholders in Edinburgh Worldwide. In a repeat of a showdown in February, it is seeking to oust the board and seize control. Its chair today warned investors to vote against Saba or risk losing access to the portfolio and its valuable investments, including SpaceX.
Writing on X, Weinstein said: “With the talk of SpaceX’s possible $1.5trn valuation, it’s time to finally answer the question on EWI & USA investors’ minds. What price did you sell a chunk of our crown jewel for? While we wait for an answer, here’s a reminder of what we know so far: Just two months ago, Baillie Gifford dumped one third of SpaceX shares in EWI and USA at a level massively lower than the discussed $1.5trn valuation – without consulting investors. Was it 800bn? 600bn? 400bn? We deserve that transparency.”
