US activist investor Elliott has built a stake of more than 5% in the £14 billion Scottish Mortgage Investment Trust, it emerged yesterday.
Justin Dowley, who chairs Scottish Mortgage, said yesterday of Elliott: “We have been in contact, as we often are with shareholders.”
Elliott Investment Management has declared a 5.037% stake in Scottish Mortgage, which has total assets of about £14bn. This comprises a 0.468% direct holding, and 4.569% accumulated through equity swaps.
The declaration comes the week after Scottish Mortgage revealed plans to make at least £1 billion available for share buy-backs over the next two years.
Shares in Scottish Mortgage rose 13.8p or 1.595% to 878.8p yesterday, giving it a stock market capitalisation of around £12.2bn. At this price, the 5.037% stake declared by Elliott equates to about £615 million.
Dan Coatsworth, investment analyst at stockbroker AJ Bell, said yesterday: “Only days since it abandoned efforts to buy UK electricals retailer Currys, activist Elliott Investment has appeared on the shareholder register of one of the most popular investment trusts among UK investors."
He added: "Only a week ago Scottish Mortgage announced plans to buy back at least £1 billion worth of shares, equal to 9% of the trust’s market value at the time of the news. That’s a chunky commitment and one has to consider if this decision was a defence mechanism should it have discovered Elliott was building a stake.
“Spotting an activist on the shareholder register can prompt a board to get one step ahead by second guessing what they want and beating them to it so as to avoid a public ridicule.”
Mr Coatsworth declared that Elliott's "5.037% position in Scottish Mortgage comes at a time when the trust’s managers have been on a charm offensive to drive more interest in what they are doing".
He observed that, while Scottish Mortgage’s share price had “slowly been moving upwards since last October, it still remains 43% below its peak in late 2021”.
Mr Coatsworth said: “Historically, Scottish Mortgage has often traded on a premium to the value of its underlying assets. Today, the shares trade on an 8% discount, so there is an opportunity for Elliott to make money simply by that discount narrowing.”
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