Scottish Mortgage’s Dividend Legacy Hangs on a Private Market Pivot as SpaceX IPO Looms

A shareholder vote on 2 July could raise private asset limits above 30% as unquoted holdings hit 41.4%. SpaceX IPO and thin dividend cover add pressure. AGM also considers buyback.

The Scottish Mortgage Investment Trust enters a three-day period that could reshape its investment strategy while testing a 43-year dividend record. Thursday marks the ex-dividend date for a final payout of 2.97 pence, lifting the full-year distribution to 4.57 pence – a 4.3% increase. But the same week brings the eagerly awaited SpaceX IPO, the trust’s largest single holding, and a shareholder vote on 2 July that could permanently alter the balance between public and private assets.

That vote will decide whether the board can raise the ceiling on private-market investments beyond the current 30% of total assets. Behind the proposal lies a simple arithmetic: unquoted holdings have ballooned to 41.4% of the portfolio from 27.5% a year earlier, driven by a £254 million spree of new private placements – nearly double the prior year’s pace. The manager, Baillie Gifford, already secured interim permission in April to deploy an extra £250 million above the 30% threshold, a move that won 99.7% shareholder support.

The dividend record, however, rests on a thin base. The total payout of £49.6 million covers more than double the net profit of £25.6 million – earnings per share stand at just 2.28 pence. As an investment trust, Scottish Mortgage can draw on retained surpluses from stronger years, but the widening gap between income and distributions raises questions about sustainability if private-market bets turn sour.

Spacex, valued by Baillie Gifford at $1.6 trillion and representing 21% of the portfolio – roughly £3.5 billion – is the most vivid example of that risk. The IPO is slated for 12 June at an indicative price of $135 per share. A successful float would provide an immediate lift to the net asset value; a stumble would expose the concentrated bet. No other listed fund globally holds a larger stake in the rocket company.

Macro pressures add to the tension. The stock dipped 0.9% on Monday to €16.95, extending its weekly slide to nearly 6% after a surprisingly strong US jobs report hit growth stocks. Wednesday’s US inflation data and Friday’s UK GDP numbers will provide the next test. Lower inflation would favour the high-growth names that dominate Scottish Mortgage’s portfolio, while a solid British GDP reading would ease recession fears. Either outcome would ripple through a trust whose top holdings include ByteDance, Databricks, Stripe and Anthropic – the AI start-up added to the private roster last year.

Despite the near-term noise, the long-term record remains impressive. The NAV posted a total return of 27.4% in the twelve months to March, comfortably beating the FTSE All-World Index’s 18%. Over a decade, the NAV has compounded at 435% against the benchmark’s 234%. The trust also retains a loyal following: it was the most-bought investment trust on Interactive Investor in May, and its ongoing charges of 0.33% with no performance fee keep cost discipline in check.

The AGM on 2 July will also vote on a share buyback programme of up to 14.99% of issued shares, but only when the stock trades below NAV. That condition marks a tightening from previous years, during which the trust repurchased £3.02 billion of its own equity – roughly 22% of its then capital – at an average cost that suggests the board is now more cautious about using buybacks to support the share price.

For investors, the coming weeks will test whether Scottish Mortgage can simultaneously honour a half-century dividend tradition and accelerate its push into illiquid private assets. The SpaceX IPO, the inflation data and the shareholder ballot form a triad of catalysts that will clarify the path – whichever direction it takes.