Scottish Mortgage’s Governance Revamp and Premium Issuance Signal a New Capital Discipline

After £1.3bn in buybacks, Scottish Mortgage flips from buyer to seller, placing shares above NAV for the first time in years, fueled by AI boom and SpaceX's impending public listing.

The board of Scottish Mortgage Investment Trust has spent the past year wrestling a stubborn discount to net asset value, buying back more than £1.3bn of its own equity. But in a striking reversal, the trust has now turned from buyer to seller – placing shares at a premium to NAV for the first time in years. The pivot reflects a broader recalibration of risk, governance and portfolio strategy, one that is being accelerated by two powerful tailwinds: artificial intelligence and the impending public listing of SpaceX.

On 1 June, Scottish Mortgage placed 2.35 million shares from its own holdings at 1,516.50p each, comfortably above the net asset value of 1,409.70p. The transaction – the latest in a string of daily placements that began on 13 May – caused no dilution for existing shareholders because the trust sold stock it already held. It was made possible only after the discount that had plagued the trust for years finally evaporated and turned into a premium.

That discount had been stubbornly persistent. Over the fiscal year ended March, the average discount narrowed only marginally, from 9.7 percent to 9.6 percent. At the year-end it actually widened from 9.0 percent to 9.5 percent. To counter the gap, Scottish Mortgage repurchased roughly 122.9 million shares, costing £1.31bn in total. Over two years the buyback programme has swallowed 307.7 million shares worth £3.02bn, equivalent to around 22 percent of the trust’s then outstanding capital. After the balance-sheet date, however, the market finally flipped the stock into premium territory.

The board now rates the discount risk as “declining and moderate”, a notable upgrade from earlier assessments. The improvement is not just a mechanical result of buybacks. Investor demand has been supercharged by two big catalysts: Nvidia’s record numbers and, above all, the expected initial public offering of SpaceX.

Elon Musk’s rocket company accounts for a striking 19.3 percent of Scottish Mortgage’s portfolio – the largest single position – and its valuation is based on internal estimates, not daily market prices. SpaceX has submitted detailed financials to the US Securities and Exchange Commission, widely seen as preparation for a listing on 12 June. The trust currently values the business at $1.25 trillion, but the IPO is targeting a valuation of up to $1.75 trillion, implying a potential windfall. An unusual lock-up structure will allow early investors to sell some shares after second-quarter results are released, with the full lock-up expiring around Christmas.

The trust’s own numbers underscore the momentum. For the fiscal year, the net asset value delivered a total return of 27.4 percent, while the share price climbed 26.8 percent. Both figures handily beat the FTSE All-World’s 18.0 percent gain. Net profit surged from £1.22bn to £3.10bn, and earnings per share jumped from 94.57p to 275.31p.

Shareholders will also collect a dividend increase. The full-year payout rises 4.3 percent to 4.57p per share, marking the 43rd consecutive year of growth. A final dividend of 2.97p is due on 10 July.

At the current price of €18.23, the stock has gained 31.25 percent since the start of the year and sits just 3.3 percent below its 52-week high of €18.85, reached on 25 May. The low point from November 2025 is now more than 50 percent in the rear-view mirror.

Alongside the market action, Scottish Mortgage’s annual report reveals a thorough overhaul of the board’s risk framework. The number of risk categories has been consolidated, with clearer definitions, reflecting the board’s view that macroeconomic, geopolitical and regulatory factors now reinforce one another rather than operating in isolation. The move also anticipates stricter internal control requirements that will apply to fiscal years beginning on 1 January 2026.

The overall financial risk is assessed as high but stable, with market volatility, geopolitical tensions and unpredictable trade policy cited as the main drivers. Artificial intelligence is singled out as both an opportunity and a source of uncertainty, potentially disrupting business models and capital allocation. Private-market holdings, which include SpaceX, intensify liquidity risk and rely on subjective valuation methods – a point the board now explicitly acknowledges.

On the balance sheet, gearing has been reduced from 13 percent to 11 percent. All maturing credit facilities have been refinanced, and an undrawn $70 million revolving credit line provides additional flexibility. The cyber-risk profile, by contrast, is rated moderate and rising, with attacks becoming more sophisticated, in part due to new technology.

Management’s capital policy remains unchanged: buy back shares when the trust trades at a discount, issue them when it commands a premium. With the SpaceX IPO on the horizon and the stock now in premium territory, the trust is well positioned to keep tapping investor demand. The next milestone for governance watchers is the start of the new fiscal year in April 2026, when the tightened control obligations take full effect.