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Beachhouse - not sure how tradeable unlisteds like SpaceX would be right now?
Best time to find their true value might be when they IPO.
It'll be interesting to see how much influence Elliott can (& wants to) wield. I suspect the managers will hold firm on their existing unlisted investments. I also suspect the new buyback scheme was a direct result of Elliott's intervention.
The impression I get is that Elliot think SMT are undervaluing the private holdings, so by selling some of the space x holding it creates a definite valuation for the remaining space x that they still hold, maybe Elliot know that if SMT do this for some of the other private equity as well it will give them definite valuations that can then effect the NAV.
I'm not convinced of Elliot's strategy to reduce the private equity holdings, including SpaceX. This is one of the things that differentiates SMT from its peers in that investors gain access to private equity as well as large caps. I can't seem to see the reasoning behind this published anywhere so I'm not sure of the logic here.
Oldnbald - no need to apologise!
Whilst I don't have a subscription to The Times, this non-paywall summary might help you:
www.proactiveinvestors.co.uk/companies/news/1043857/scottish-mortgage-asked-to-get-real-on-private-holdings-like-spacex-bytedance-1043857.html
Apologies lordloadsoflolly, it was directed at sfh300 with this link:
https://stocks.apple.com/A-s3JQ97hRRaWcoFGR2mVvw
290754 - playing devil’s advocate, I suppose you could argue SMT’s managers might be persuaded to play things more cautiously with unlisteds in future, as these have been a drag on recent performance.
And that could lead to lost opportunities.
Or that they might be talked into part-selling some of their holdings with more racy current valuations (Nvidia springs to mind). Personally, I’d be quite happy with that anyway, but I guess it might mean missing out on the final? leg of their bull run.
I don’t really see much downside with Elliott myself, but am just trying to surmise the type of concerns others might have.
Sounds like good news for all shareholders to me - what is the downside?
Oldnbald - not sure if this was addressed at me "Any chance you could post the content pls? Behind a paywall."
The content in that link's not behind a paywall for me. But if it still is for you, let me know and I'll post the most relevant bits (it's a lengthy article!)
Any chance you could post the content pls? Behind a paywall.
Elliott are viciously and relentlessly focussed on success and gets any boards attention - look at Salesforce in CY 2023. Went from being a nonsense run company driven by the politics and ego of its CEO, with great revenue and minimal profitability to a completely refocussed company with great EPS, good Margins and even a dividend in a year.
I have bought SMT today purely on the back of Elliot's reputation. I would have done last week but sadly getting cash available took a couple of days.
Whilst I am not always a fan of buybacks - they are a great use of cash when you are buying back your own assets at a discount. I mean - who wouldn't pay 90p for a £1 coin?
I think we've established by now that some buybacks produce long term benefits, others don't.
What's perhaps more relevant here is Elliott's involvement (which probably kickstarted SMT's new buyback scheme in the first place).
As I've posted previously, it's worth reading up on Alliance Trust's "run in" with Elliott. In 2017, Elliott finally sold its holding in AT, saying:
"When Elliott became a shareholder over five years ago Alliance Trust had poor corporate governance and its shares traded at more than a 15% discount to net asset value. Since then, corporate governance has improved, an external asset manager has been proposed and the discount has narrowed to less than 5%."
You can read the full article via the link below. Whilst Elliott's relationship with AT was certainly fractious, the end result was largely positive:
www.citywire.com/new-model-adviser/news/elliott-ends-war-with-alliance-trust/a987878
I recall owning a US stock where they announced a material buyback authorisation. Moved the SP.
After the allocation had been exhausted over 2 years (amounting to purchasing 5% of the float at the time of the announcement), digging into the 10K's...it was determined by a 3rd party that 2 years later, the size of the float was the same. Why? Stock based comp and convertibles that converted!
The double whammy was when their earnings dropped too! LOL!
This should answer some questions:
"Why activist Elliott wants a stake in Scottish Mortgage Trust"
https://stocks.apple.com/A-s3JQ97hRRaWcoFGR2mVvw
DorestLSE - sure, not every buyback bolsters a share price in the longer term.
Just as not every buyback is done for the same reason initially.
Diageo has very little in common with SMT, so I don’t see how you can usefully extrapolate from one to t’other.
As for preferring a special dividend, in effect you’ve been given one right now - thanks to the near 13% share price uplift since 15 March.
If you think there are better opportunities out there, now might be a good time to take the money & run.
Personally, I don’t see it that way & will definitively be staying put.
“… is the SMT buyback coming from borrowing or have they been sitting on a £1bn cash pile”
Part cash. Majority trimming publicly traded investments where they view immediate opportunity for growth is seen as more limited.
Trimming the publicly traded investments will skew the balance towards the private investments - up to 28%.
My view is that they have sight of an IPO, which will balance it down again and boost NAV.
I understand what you say but I have a few other long term holdings with disappointing results following buy backs such as Diageo which has been buying back shares for a couple of years and it hasn't done anything for the share price (and this was before the recent profit warning) . In reality I would prefer a special dividend if they have excess cash and I can decide where to invest it. Artificially boosting share prices is often about executive bonuses. Incidentally is the SMT buyback coming from borrowing or have they been sitting on a £1bn cash pile?
DorsetLSE - there are probably two main schools of thought with buybacks.
Either: managers are running out of growth opportunities & see buybacks as a short term way to boost the share price.
Or: managers genuinely believe their shares are currently undervalued & use buybacks to signal this to the market.
Whichever people believe here, the short term impact is that with fewer shares in issue, the price rises. So SMT value creation, rather than destruction, for now.
Personally, I believe the size of the buyback programme is the gamechanger here, as it’s far greater than any previous scheme. And it’s not as if the shares are being bought back at a particularly high price for now. Which is probably why they’ve gone in hard early, whilst the price remains relatively subdued. They’ve already bought back over £40m worth in the first week.
Once again by signalling a buy back the share price rises which makes the buy back less effective and ultimately it's destroying value. So I am thinking that the recent share price rise is not a true reflection of where SMT is heading as the underlying assets haven't changed. Time to trim my stake a little more perhaps.
Stocksr- I don’t think the managers will “have adjusted their investments to more profitable equities.”
That’s not their style.
What HAS changed (& is largely responsible for the recent SP re-rate) is the big boost in share buybacks. Plus news that an activist investor, renowned for improving performance at another trust, has acquired a 5% stake.
Yes Zinc, I've been looking at charts all month, and against my better judgement bought today, about 5% of my available cash, I think it's past the bottoming out, so have every confidence in an upward surge, hopefully the managers have adjusted their investments to more profitable equities
Thrfrogster - I guess we'll never know their precise motivation. But whatever - from where I'm standing, it's hard to read any negatives into it.
Elliot's may have the same motives as previously with ATST or they may just see it as an opportunity for the hedge fund to make a quick buck. After all, it doesn't take a massive price increase to make a significant return when your stake is 5% of the fund.
As small shareholders there is not much we can do but stay onboard for the journey. Hope the price goes up in the meantime
StrictlyZinc - whatever attracted Elliott Associates to SMT, given their history they presumably view it as a fund whose recent underperformance they can help reverse. Otherwise, why increase their holding to 5%?
Doesn't necessarily mean they're right of course, but at least they've succeeded with others in the past.
Timing is interesting on this Elliot stake..
I wonder what their motivation is....they are activists after all.
So let’s assume that rather than being a millstone, the unquoteds include some real gems that are soaring in performance and value. How can Elliot’s get some of the action? They can’t without buying SMT.
The market always assumes the unquoteds are too risky and a drain on the share price. What is Elliot’s know better ??