Update: Scottish Mortgage (SMT) shares rallied 5% after bullish SpaceX investors shook off a warning from fund manager Tom Slater of the potential for volatility in Elon Musk’s company heading for a record $1.77trn (£1.3trn) flotation this afternoon.
Shares in the £15.9bn Baillie Gifford flagship advanced 68.5p to £14.94 before slipping to close at £14.77, up 3.6%, after SpaceX cheered markets with confirmation it had raised $75bn from its initial public offer. The IPO was more than three times oversubscribed with $250bn of applications to buy the shares. UK investors bought £271m of SpaceX shares with 61% receiving their full subscription although applications for over £2,000 were scaled back, said Marex, the broker running the UK offer.
The shares listed on Nasdaq under the ticker of SPCX at a price of $135 that represented a heady valuation of 92 times sales. They “popped” 19% higher on their first day of trading to $160.95, lifting the market value to $2.1trn. This puts SpaceX into sixth place on the US stock market behind fellow “megacaps” Nvidia, Apple, Alphabet, Microsoft and Amazon. It also makes Musk, owner of at least 42% of the shares, the world’s first trillionaire when his holding is combined with his stake in Tesla and other assets.
Scottish Mortgage has 21% invested in SpaceX, having seen its $200m (£151m) investment in 2018, when SpaceX was valued at $30bn, soar to $3.5bn. An upwards revaluation announced by investment group Baillie Gifford last week was estimated by QuotedData to have valued the company at $1.6trn, a bit below the official IPO valuation.
Slater, who has previously spoken about his excitement for SpaceX’ long-term prospects, cautioned investors not to be blind to the short-term risks telling Trustnet that SpaceX shares could “double or halve in the next few days” and that the trust had a “very high degree of concentration”.
“Be aware that the fund is not as diversified as it has historically been,” Slater said of SMT which is locked into its holding for at least two months.
Peter Singlehurst, head of private companies at Baillie Gifford and manager of Schiehallion (MNTN), its private equity fund with 11.6% in SpaceX, told CNBC that the company had been very good at assessing the risks of difficult objectives like reusable rockets, Starlink, Starship and the orbital datacentres part of its AI strategy “that is the next outlandish hypothesis they are seeking to validate”.
While the payoffs could be significant, Singlehurst said investors needed to understand that “there are a range of outcomes here”, increasing the upside but also the potential downside. However, he was optimistic given the competitive advantage SpaceX had gained by cutting the cost of launching material and people into space.
He said the question for Baillie Gifford’s trusts was “what is the right position size” as lock-in restrictions ease and they are free to sell their stakes.
SMT’s rise today leaves it below the £15.45 all-time high it reached on 2 June. Its previous peak was £15.28 in November 2021. The shares have recovered strongly from their crash in the 2022 bear market for growth stocks, climbing 110% over three years and 42.5% in the past 12 months.
Other Baillie Gifford trusts that have benefited from large SpaceX holdings in the past year also rose. Edinburgh Worldwide (EWI) gained a further 2.6%, Schiehallion (MNTN) put on 2.8% and Baillie Gifford US Growth (USA) advanced 3.7%.
RIT Capital Partners (RCP), the £3.1bn Rothschild-backed global trust which holds 2.5% of its assets in SpaceX, rose 3.2%. Its stake was worth £102m at 31 December when SpaceX was valued at $800bn, meaning the position should have doubled since then.
Market Boggett, fund manager of Seraphim Space (SSIT), which does not hold SpaceX but is riding high on the attention its IPO is putting on the space tech sector, said: “A SpaceX IPO is a landmark moment for the space economy. More than simply attracting additional venture capital, it would further establish space as a mainstream investment category and provide public market investors with a highly visible benchmark for the sector’s potential.”
Ismael Garcia Puente, deputy director of investment strategy of Mapfre Asset Management in Spain, said SpaceX’s expensive valuation of nearly 100 times sales should give investors pause for thought.
“What upside potential does an IPO like SpaceX’s, the largest in history, offer investors? As things stand today, investors are essentially buying a company whose core business is launching satellites, which remains its largest source of revenue. Its technology and AI-related businesses are still operating at a loss. We need to see how these segments evolve before we can assess their long-term profitability,” he said.
The Financial Times’ Alphaville team has estimated that index-tracking funds will need to invest over $14bn in SpaceX in the coming weeks, which could support the post-IPO price.
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