Scottish Mortgage Investment Trust (LSE: SMT) has seen its share price surge sharply, with SpaceX playing a central role in driving that performance.
The FTSE 100 investment trust began building its position in Elon Musk’s privately owned space company seven years ago, showing considerable foresight in targeting the firm early.
Scottish Mortgage invested a total of $200m in SpaceX between 2018 and 2021, a measured but high-conviction bet on a company that was still far from public markets.
Following Friday’s record-breaking IPO, SpaceX is now valued at $2.1trn, and Scottish Mortgage’s stake could be worth just shy of $5bn.
That represents a return of around 25 times the original investment, a figure that underscores the trust’s long-term private equity approach.
Manager Tom Slater has long maintained that a small number of exceptional outliers drive the vast majority of stock market returns, and this outcome appears to validate that philosophy entirely.
Scottish Mortgage shares are up 45% over the past year and 120% over three years, though the trust suffered a brutal crash of around 50% back in 2022 during the US technology sell-off.
SpaceX shares closed on Friday 12 June at $160.95, an increase of 19.22% on the original quoted price of $135, reflecting strong investor appetite for the newly public company.
Rules designed to curb flipping should limit immediate profit-taking, though some selling pressure in the days ahead remains a realistic possibility as early enthusiasm fades.
SpaceX now makes up more than 20% of Scottish Mortgage’s total portfolio, meaning the trust’s fortunes are increasingly tied to whatever direction the space company’s stock takes next.
The trust is currently trading at a discount of just 2.27% to its underlying net asset value, compared to its 12-month average discount of 6.94%, suggesting it is far less of a bargain than it once was.
More high-profile tech IPOs are on the horizon, with Anthropic, which Scottish Mortgage holds, and ChatGPT owner OpenAI, which it does not, both expected to come to market.
Those listings could sustain positive sentiment around growth and technology investing, particularly if evidence emerges that artificial intelligence is delivering a meaningful productivity boost across the economy.
However, risks remain significant, including the possibility of an oil price spike, renewed inflationary pressure, or a broader reversal in AI-related valuations that could weigh heavily on the trust.
For investors considering Scottish Mortgage today, a drip-feed approach to building a position may be more prudent than chasing the shares at their current elevated levels.