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Scottish Mortgage Investment Trust has defended its $1.25tn valuation of SpaceX, even though it is far lower than the $1.75tn reportedly sought by Elon Musk’s company in what is expected to be the biggest initial public offering in history.
Baillie Gifford, which manages the £16bn trust, clarified its valuation on Tuesday in response to a high volume of queries from existing shareholders ahead of the blockbuster IPO, according to a person familiar with the situation.
Scottish Mortgage, the most popular investment trust in the UK and seen by some investors as a “proxy” for SpaceX as a way to gain access to a private company, said this valuation put its own holding in SpaceX at almost £3bn.
The valuation follows SpaceX’s takeover of Musk’s AI start-up xAI earlier this year. Baillie Gifford said its investment team had met SpaceX’s management in recent weeks and its valuation process was based on “verifiable transactions, not press speculation”.
A client briefing note published by the trust added that a more precise valuation would be possible after SpaceX’s full prospectus with audited financial results was published. This could be as soon as this month, the note added.
SpaceX’s IPO is expected to take place in June, potentially coinciding — at Musk’s behest — with a rare planetary alignment and the billionaire’s 55th birthday, the FT previously reported.
The rapid growth in the value of SpaceX, which Baillie Gifford first invested in about eight years ago, means it now accounts for almost a fifth of the trust’s entire portfolio. The holding has grown from its original investment by about 19 times.
Tom Slater, manager of Scottish Mortgage, said: “SpaceX is no longer best understood as a rocket company — it is becoming infrastructure for the global economy.”
Scottish Mortgage said it invested a total of £151mn — or $200mn at the time of purchase — from the end of 2018 through to August 2021. It has made no additional investments in SpaceX over the past five years.
The investment trust became an unlikely star of global tech investing thanks to its early bets on companies such as Tesla, Facebook and Amazon.
But the trust has also come under the spotlight for its large exposure to private assets, which are less transparent in terms of valuation compared with public markets and harder to sell in times of market stress.
Including its SpaceX holding, the trust has 41.5 per cent invested in private companies, above its 30 per cent limit, constraining the manager’s ability to make further investments when these businesses raise money.
As a result, the trust sought and gained approval from shareholders to be able to make up to £250mn of further investments in private companies if it went above the 30 per cent limit.
Alan Brierley, an analyst at Investec, said: “Having previously expressed concerns over the private book, the excesses of 2020/21 have now been worked through, and a key driver of the renaissance has been SpaceX, which is now shaping up for one of the most exciting IPOs in history.”
He added that the large exposure to private assets “is a function of the significant increase of SpaceX’s valuation in the past year, along with healthy mark-ups of other privates — ByteDance, Stripe, Databricks and Anthropic.
“If the SpaceX IPO goes ahead, and along with other private holdings, then we would expect the private weighting to fall materially in coming months.”
Amar Bhidé departed Scottish Mortgage’s board as a director three years ago, after he publicly raised concerns about the trust’s investments in unlisted companies and clashed with the then chair over his assessment of the risks.
SpaceX did not immediately respond to a request seeking comment.