Scottish Mortgage Turns Premium into Opportunity: Share Issuance Accelerates as £13.8bn Trust Rides AI and Private Markets Wave

Scottish Mortgage Investment Trust flips from share buybacks to issuing stock as investor demand drives premium; SpaceX and Nvidia fuel strong returns.

For years, Scottish Mortgage Investment Trust devoted billions to buying back its own shares in an effort to close a stubborn discount to net asset value. That era is over. The trust is now doing the opposite — issuing new stock — as a surge in demand pushes its shares into premium territory. The shift, which began in early May, accelerated on 20 May when Scottish Mortgage placed 2.4 million existing treasury shares at 1,466.46 pence each, following a 2.1 million share issue on 8 May at 1,432.43 pence.

The move reflects a dramatic change in investor sentiment. After trading at a discount of roughly 9.5% at the end of March — a slight widening from 9.0% a year earlier — the shares have since flipped to a small premium. For an investment trust, that is more than cosmetic: issuing shares above net asset value can boost returns for existing holders. The trust has been tapping the market on nearly every trading day since mid-May, a sign that demand now outstrips supply.

The numbers behind the turnaround are striking. In its financial year to the end of March, Scottish Mortgage delivered a net asset value total return of 27.4%, comfortably ahead of the FTSE All-World Index's 18.0%. The share price total return came in at 26.8%, restoring the stock to levels last seen in late 2021. In Frankfurt, the shares closed at €17.76 on Wednesday, up roughly 28% year to date. The 52-week high of €18.85 remains within striking distance.

SpaceX and Nvidia: The twin engines

The biggest single contributor to performance is SpaceX, which now accounts for 19% of the portfolio — the largest holding. Manager Tom Slater describes the rocket-and-satellite company not merely as a contractor but as a “dual monopoly”, pointing to its dominant launch platform and the Starlink satellite business. Starlink, he notes, generates predictable, high-margin revenue that rivals the best software companies. With a blockbuster initial public offering expected in June 2026, the trust's concentrated bet could pay off handsomely. An unusual lock-up structure means existing investors can sell some shares after second-quarter results, then more after third-quarter results, with full lock-up expiry around Christmas.

Alongside SpaceX, Nvidia continues to provide powerful tailwinds. The chipmaker reported first-quarter revenue of $81.6 billion for its new fiscal year, a jump of 85% year on year, with its data centre business alone contributing $75.2 billion on the back of Blackwell-300 products and strong networking demand. For a growth-focused trust, that is a critical source of momentum.

Doubling down on private markets

The board has given Slater even more firepower to invest in unlisted companies, approving an additional £250 million for private equity holdings. That flexibility comes as the trust deployed £254 million into private firms over the past year — nearly double the prior year's figure. New additions include AI developer Anthropic, healthtech company Loyal Animal Health and social platform RedNote, while existing holdings such as Enveda, Redwood Materials and Zipline received further capital.

Total assets under management swelled to £13.82 billion from £12.08 billion, while the ongoing charges ratio held steady at 0.33%. Gearing — the use of long-term debt to boost returns — fell from 13% to 11% of net assets, not because of repayments but because the portfolio grew faster. Total debt stood at £1.6 billion against just £11 million in cash, with average borrowing costs of a modest 3.6%.

Dividend history intact, but secondary

Scottish Mortgage also extended its unbroken run of rising payouts, lifting the full-year dividend by 4.3% to 4.57 pence per share — the 43rd consecutive annual increase. The final dividend of 2.97 pence is due for payment on 10 July. While the trust's mandate remains squarely on capital growth rather than income, the board views the steady dividend as a signal of discipline and a marker of its “Dividend Hero” status among British investment trusts.

Board changes and China exposure

There are changes ahead in the boardroom. Heather Manners is expected to join as an independent non-executive director from the start of January, subject to shareholder approval at the annual general meeting on 2 July in Edinburgh. Professor Maxwell will step down at the conclusion of that meeting.

Investors will also keep a close eye on geopolitical risks, particularly the trust's 14% exposure to China. That includes ByteDance, the parent company of TikTok, and a recent meeting between Donald Trump and Xi Jinping did little to ease trade tensions. New US restrictions could weigh on those holdings, the board acknowledged.

The outlook: premium sustainability and the SpaceX catalyst

For the months ahead, the focus narrows to two concrete questions: whether the premium to net asset value can hold steady enough to justify further share issuance, and how the two large growth engines — Nvidia and SpaceX — perform after their latest valuation surges. With the SpaceX IPO set to be the next major milestone, Scottish Mortgage's strategic pivot from buybacks to stock sales looks increasingly like a bet on sustained demand. So far, the market is placing its own premium on that wager.