What’s it worth?
Mick Gilligan, head of the model portfolio service at wealth management firm Killik & Co, notes that the discount at which Scottish Mortgage shares trade has fallen to 7 per cent, having been at 15 per cent prior to the announcement of the buyback.
He says that represents a gain for all shareholders and he has not been buying the shares for his clients since early 2023, but is comfortable with legacy positions owned by his clients in the trust.
Analysts at Numis are more positive on the prospects for Scottish Mortgage. In a note to clients, shared with FT Adviser, they noted that Elliott’s investment was worth £607mn on the day they declared it.
They said: “Elliott has a long, albeit sporadic, relationship with investment companies, having been active in the 1990s, but stepping back as discounts narrowed following the widespread introduction of buybacks. We believe Elliott’s interest in the sector has also been limited by outgrowing the investment companies sector, with few ICs having the size or trading liquidity for it to take a position.”
They regard the trust’s attitude to buybacks in recent years as being “prudent”, but also view the decision to buy back shares as being a desire to “keep the wolf from the door”, that is, discourage further investment by activists that may want to change how the trust is run.
The analysts also believe it reflects a greater level of confidence in how the unquoted assets are performing, and so free up the cash to do buybacks.
The fate of Scottish Mortgage, one of the principal funds through which investors can access unquoted technology shares in the UK, is likely to resonate with advisers in the months to come.
David Thorpe is investment editor at FT Adviser
