Stake speculation

Scottish Mortgage will resist calls to change plan

Tom Slater
Tom Slater: no reason to change tactics (pic: Terry Murden)

Britain’s biggest investment trust, run by Edinburgh-based fund manager Baillie Gifford, will resist any pressure from activist investor Elliott to sell its stakes in big privately-owned businesses.

Tom Slater, who is in charge of the £12.5 billion Scottish Mortgage Investment Trust, sees no reason to sell investments in the likes of SpaceX and ByteDance, the owner of TikTok, in order to boost the value of its portfolio.

He has responded to a move by Elliott to take a 5% stake in the FTSE 100 constituent. Some analysts expect it to agitate for change to the trust’s weighting towards unquoted companies.

The trust’s shares have been trading at a net discount to its underlying assets and Elliott believes this is because the market undervalues its private holdings which are harder to judge as they are not subject to real time public trading platforms.

Mr Slater has dismissed this as a reason to sell and argues that there are measures that allow for values to be set.

“SpaceX raised money fairly recently, so that’s a live valuation. ByteDance bought back stock from shareholders; we could participate in that to crystallise the value,” he told The Sunday Times.

“A transaction between two willing parties validates the valuation. We don’t need to be one of those parties.”

Elliott, an American hedge fund is known for forcing change in boardrooms campaigns, but City sources say there is no indication of tension with the Scottish Mortgage board. Mr Slater said his conversations with Elliott have been “constructive”.

Scottish Mortgage built its reputation through early-stage tech investments in the companies such as Amazon, Moderna and Tesla, making big returns as their values soared. Over the past 18 months, as tech values slumped, so has the trust’s share price.

Scottish Mortgage recently announced plans to repurchase £1 billion of its shares to narrow the discount.

Elliott said it welcomed the £1 billion buyback but declined to comment further.

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