Scottish Mortgage Investment Trust is seeking shareholder approval to invest an extra £250 million in unlisted companies after the value of Elon Musk’s SpaceX almost doubled late last year.

The additional capacity, which would increase the trust’s exposure to private companies to more than the current 30 per cent cap, is equivalent to about 1.7 per cent of Scottish Mortgage’s total assets of £15.2 billion.

Shareholders will vote on the proposals at a general meeting on April 10. From the 2027 annual meeting onwards, the extra £250 million capacity will be subject to annual shareholder approval. 

The cap does not force the fund managers to rebalance the portfolio, but it does prevent them from making additional investments in private firms. 

However, the cap was breached last December after SpaceX’s valuation rocketed. Staff at Musk’s space exploration firm were able to sell their shares to investors as part of a tender offer that valued the company at $800 billion, nearly double the previous level. 

As a result, Scottish Mortgage’s exposure to SpaceX rose to 15.1 per cent of its total assets in December, up from 8.2 per cent the month before. It has since increased to 15.4 per cent, making its stake worth about £2.2 billion, up from about £508 million in September. 

According to the fund’s latest factsheet, 37 per cent of the firm’s total assets were in private companies at the end of last month. Behind SpaceX, ByteDance and Stripe were the two largest stakes in private companies, comprising 4.1 per cent and 3.9 per cent of the portfolio respectively. 

The share of the portfolio in unquoted firms has also risen as a result of a share buyback programme conducted last year, which was funded by the sale of shares in listed companies. 

SpaceX is reported to be lining up a stock market flotation this year, following its merger with xAI in February. If the company does go public this year, that would bring the trust’s exposure to private companies back below the 30 per cent cap.

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“Our role is to be patient, long-term partners to exceptional private companies as they continue to scale,” Tom Slater, fund manager at Scottish Mortgage, said. 

“From time to time, market movements can restrict our ability to make further investments in private companies. This proposal gives the board additional flexibility to act in shareholders’ long-term interests by permitting us to support our private holdings when it matters most, while remaining selective about new opportunities,” he added.

Matthew Read, senior analyst at QuotedData, said the proposal was a “pragmatic solution” for Scottish Mortgage. 

“There may be instances where being unable to support subsequent funding rounds could be detrimental, either because value-accretive follow-on investments cannot be made or because SMT’s stake in successful companies could be diluted if it is unable to maintain its position,” he said.