Scottish Mortgage Abandons the Buyback: Daily Share Sales at a Premium Signal a New Era of Growth Demand

After £3B in buybacks, Scottish Mortgage now issues stock almost daily at a premium as demand from SpaceX, Arm, and Nvidia holdings drives shares to multi-year highs.

Scottish Mortgage Investment Trust has executed a complete about-turn in its capital management strategy. After pumping roughly £3 billion into share buybacks two years ago to narrow a persistent discount to net asset value, the trust now finds itself issuing new stock almost daily – all at a premium. The shift reflects a surge in demand that has driven the shares to multi-year highs and created a dynamic the market hasn't seen from this fund in years.

Since 13 May, the trust has placed millions of new shares on nearly every trading day. On 20 May, it issued 2.4 million shares at 1,466.46 pence, followed by 2.2 million at 1,476.17 pence the next day. On 22 May, another 2.25 million shares were sold at 1,496.62 pence. All came from the trust's treasury stock, and every transaction was executed above the net asset value (NAV). The total number of shares in issue now stands at roughly 1.1 billion, with the trust holding a further 379.6 million in treasury.

The premium to NAV has expanded to 6.5%, a stark reversal from the days when Scottish Mortgage traded on a double-digit discount. The shares closed at €17.89 yesterday, up 28.83% since the start of the year and 7.41% over the past 30 days, though they slipped about 5% on a single trading day as the broader market rotated.

The portfolio mix fuelling the frenzy

About 40% of the trust’s assets are tied up in privately held companies – names such as ByteDance, Stripe and Anthropic that are difficult for retail investors to access directly. But the most powerful magnet is SpaceX. Scottish Mortgage marked up its valuation of the Elon Musk-led rocket company, raising its stake to 19.3% of total assets as of 31 March, up from 15.4% at the end of February. The trust values its SpaceX holding at $1.25 trillion, narrower than the potential $1.75 trillion some see for a Nasdaq listing under the ticker “SPCX” as early as 12 June. That position alone is worth roughly £3 billion.

The public portion of the portfolio has also delivered firepower. Arm Holdings, the chip designer, surged 46.5% in a single week to $306.51, bringing its year-to-date gain to 180%. Analysts at Bernstein maintained a buy rating with a $300 target, citing the prospect of a fivefold earnings increase by 2030. TD Cowen raised its price target, pointing to more than $2 billion in customer orders for AI chip designs and a 49% profit jump in the latest quarter.

Nvidia provided another tailwind, reporting first-quarter revenue of $81.6 billion – an 85% increase and a new record – alongside an aggressive buyback programme and a sharply higher dividend. The chip giant alone accounts for 3.17% of Scottish Mortgage’s listed holdings, which also include TSMC (5.72%), MercadoLibre (3.99%), Amazon (3.56%) and ASML (3.22%).

A remarkable return and a sustainable model?

Over the past twelve months, Scottish Mortgage has delivered a total return of 51.9%, the best performance among its peer group of nine comparable investment trusts. That track record has turned the trust into a share-printing machine: the premium allows it to issue stock without diluting existing holders, and the proceeds from treasury sales flow straight into the portfolio.

Yet the new model carries structural risks. With almost 60% of assets invested in the US market, the trust is acutely exposed to American economic data and sentiment. If demand for the shares wanes, the premium could evaporate and the issuance spigot could shut just as quickly. The trust’s dependence on periodic private-market valuations – particularly of SpaceX – adds another layer of uncertainty ahead of any IPO.

At the annual general meeting in Edinburgh on 2 July, shareholders will vote on a final dividend of 2.79 pence per share, a yield of just 0.32%. That hardly matters to growth-oriented investors who have piled into Scottish Mortgage for its exposure to unlisted tech plays and AI winners. The real question is whether the trust can sustain the premium long enough to keep the daily issuance machine running – or whether the current enthusiasm will eventually exhaust itself, leaving the trust back where it started.