Scottish Mortgage exits Tesla and reduces its SpaceX position

Tesla stake fully sold

Quartz reports that Scottish Mortgage Investment Trust, a London-listed fund managed by Baillie Gifford, exited Tesla entirely in April. The trust first invested in Tesla in 2013. In a July portfolio update, it said its roughly $470 million position had generated about $6.2 billion in realized profit over 13 years.

SpaceX holding was reduced

According to Quartz, Scottish Mortgage cut its SpaceX stake so that it accounted for 11.1% of total assets, down from 15% at Sept. 30. The article says the figure was 11.1% on Wednesday. Quartz reports that the trust first invested in SpaceX in December 2018, when the company was reported to be valued at about $31 billion, and that it committed about $200 million through 2021.

Performance and use of proceeds

Quartz says Scottish Mortgage’s net asset value rose 31.5% over the half-year ended Sept. 30, compared with a 16% gain for the FTSE All-World Index. The trust’s share price increased 33.8% on a total-return basis. SpaceX contributed 8 percentage points to the trust’s return, according to the article. Quartz reports that money from SpaceX sales was used partly to reduce debt, and net gearing fell from 11.0% to 4.3%.

What the trust said about both companies

Quartz quotes the trust as saying Tesla had delivered 13 times the capital invested, but that its share price appeared to reflect much of the company’s promise in autonomy and robotics. The trust also pointed to tougher competition in Tesla’s main car business, especially in China, according to Quartz and CNBC. On SpaceX, Quartz says the trust said it had sold stock as IPO lockups expired in stages, while still maintaining a substantial investment. It also said the company remained an important holding after flotation.

Market reaction and investor concerns

Quartz reports that SpaceX shares fell about 9% on Thursday and Tesla shares dropped about 11%, extending a selloff that followed Democratic gains in the midterm elections. The combined market value of the two companies was down by more than $420 billion from Tuesday’s close, according to the article. Quartz says investors are concerned that congressional investigators may focus on Elon Musk after the midterms, which could mean closer regulation of his companies.