Scottish Mortgage’s Pivot from Buybacks to Issuance Draws a New Wave of Investors

Scottish Mortgage Investment Trust issues new shares at a premium after years of buybacks, driven by younger investors and bets on SpaceX and AI, reigniting concentration risk debate.

Scottish Mortgage Investment Trust has turned a corner. After years of buying back its own shares by the billion, the growth-focused trust is now selling new stock at a premium. The shift reflects a surge in demand that is pulling in a younger, more digitally savvy generation of investors — and reigniting a debate about concentration risk.

A study from Invesco published on Monday laid bare the demographic change. Among 25- to 34-year-olds, 55% plan to put money into investment trusts. That compares with just 9% of those over 65. For the 18-to-24 bracket, the figure sits at 38%. Across all age groups, the average is 29%. The numbers help explain why Scottish Mortgage, with its heavy exposure to unlisted tech giants, is finding new buyers.

The flip side is a growing reliance on social media. Some 36% of trust investors now follow financial influencers, the study found, while the UK’s Financial Conduct Authority flagged 1,267 illegal adverts in April alone.

Shares hit multi-year highs as premium widens

The market has rewarded the trust’s renewed popularity. In London, Scottish Mortgage closed at 1,500 pence — a level not seen since late 2021. In Germany, the stock touched 19.02 euros on Monday, up 6.08% on the day, carving out a fresh 52-week high. That compares with an earlier high of 18.75 euros recorded the previous Monday, underlining the pace of the rally.

Year to date, the trust has gained 36.97% in euro terms, and over the past twelve months the return stands at roughly 50%. The shares now trade at a 6.52% premium to net asset value — a clear sign that buyers are paying up for anticipated gains from future IPOs and valuation uplifts.

That premium has emboldened the management team to restart share issuance. On 22 May alone, the trust sold 2.2 million shares from its own portfolio at a 6.5% premium to NAV. That followed two earlier tranches of more than two million shares. The move is a direct reversal of the buyback strategy that dominated the high-interest-rate era.

Space and AI drive the story — with a big bet on Elon Musk

Manager Tom Slater describes the current environment as an “era of expectation.” The trust is positioned across three layers of artificial intelligence — enablers, infrastructure and applications. Nvidia remains a cornerstone, having posted quarterly revenue of $81.6 billion most recently. Another key AI holding, Anthropic, is said to have annualized revenues of $45 billion.

But the biggest single catalyst is SpaceX. The trust’s holding in the private rocket company has ballooned from 0.6% of the portfolio in 2019 to 19.3% today. An initial investment of £151 million is now worth around £3 billion — a gain of 1,900%. The entire trust’s performance is increasingly tied to the fortunes of one unlisted business.

Market watchers are fixated on SpaceX’s long-awaited IPO. One report points to a listing as early as 12 June this year, with a targeted valuation of $1.75 trillion. Another suggests the flotation could come in June 2026, with a valuation of up to $1.25 trillion. Whichever timeline proves accurate, the trust is a major beneficiary.

Fresh capital opens doors for more private bets

To capitalise on the momentum, shareholders in April authorised an additional £250 million headroom for unlisted investments. Around 40% of the trust’s total assets are already tied up in 53 private companies. The new firepower allows Slater’s team to keep expanding that portfolio even when internal thresholds are breached.

The issuance of new shares at a premium does two things: it brings in cash to fund those private bets, and it lifts the underlying asset value for existing holders. That virtuous cycle is now in full swing.

Still, the concentration is striking. Scottish Mortgage’s institutional ownership stands at just 8.6%, compared with 63.6% for peer trust 3i. The retail-heavy shareholder base is more susceptible to sentiment swings — and more likely to be influenced by the finfluencers the FCA is chasing.

With SpaceX due to debut on public markets and AI holdings still delivering blockbuster earnings, the trust’s narrative is as compelling as it is concentrated. The next few months will test whether that narrative translates into sustainable gains — or whether a single missed expectation could unravel the premium.