Scottish Mortgage Trust (SMT) has confirmed its $1.25trn (£920bn) valuation of SpaceX and said it does not yet know what restrictions will apply to its $3.94bn (£2.98bn) investment after the Elon Musk group’s possible record-breaking flotation this summer.
There has been intense speculation about the valuation of the space technology giant since its merger with Musk’s xAI in February and the commercial scale of its operations becomes clearer.
Media reports have repeatedly suggested the company is looking for a valuation of between $1.75trn and $2trn as it looks to raise around $75bn.
Scottish Mortgage, the £15bn flagship of fund manager Baillie Gifford, said that as at 31 March it had kept SpaceX at $1.25trn. This followed a revaluation in the first quarter responding to secondary market transactions after the merger with Musk’s artificial intelligence start-up. In December Baillie Gifford had also revealed it had hiked the valuation of SpaceX to $800bn in its investment trusts.
This is in line with Baillie Gifford’s practice of using verifiable transactions rather than market commentary or press speculation to value private companies in its funds. Valuations are set by an in-house team separate from the fund managers and working with S&P Global, an independent valuer.
It means there is scope for a big uplift for SMT if SpaceX achieves its reported target, but avoids a costly writedown if the valuations prove too ambitious.
In a statement, SMT fund manager Tom Slater said his conviction in the potential for SpaceX had grown.
“SpaceX is no longer best understood as a rocket company – it is becoming infrastructure for the global economy. Starlink already serves over 10m subscribers across more than 160 countries, and we think that business is still in its infancy. The opportunity broadens materially when you consider mobile connectivity, defence, aviation and maritime, and broadens again when you consider what Starship makes possible: larger satellites, orbital compute, lunar logistics and markets that do not yet exist in any meaningful form,” Slater said.
SpaceX has been a phenomenally successfully investment for SMT and its stablemates Baillie Gifford US Growth (USA), Schieahallion (MNTN) and Edinburgh Worldwide (EWI). SMT’s investment of $200m (£151m) in August 2021 has made a 19 times return and has been the biggest driver in the trust’s recovery from 2023 lows following a 2022 share price crash. Over one and three years, its shares have rallied 51% and 131%.
SMT said its investment team had met SpaceX management in recent weeks and awaited publication of a full prospectus that will provide all the company’s financials as well as terms of the initial public offer (IPO).
At this stage, as is typical with an IPO, they do not know what restrictions, if any, will apply to existing shareholders after the listing and how long SMT may have to hold on to its stake in SpaceX.
SMT points out that SpaceX listing as a public company will introduce more volatility into its daily net asset valuation (NAV) which will be affected by changes in SpaceX’s share price. It will also reduce the trust’s private equity holdings from their current high of 41.6% to below their 30% cap, which shareholders had to temporarily extend in April due to the large holding in unlisted SpaceX.
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