Scottish Mortgage & SpaceX IPO|Illiquidity Premium at Risk?

The Illiquidity Premium That Built SMT's Decade

SMT's premium to NAV has never been a straightforward function of the quality of its holdings. It has been, more precisely, a function of access — the trust offered retail and institutional investors exposure to assets they could not otherwise reach. SpaceX private, held at $1.25 trillion, was the purest expression of that access advantage.

When an asset that justified the access premium acquires a public ticker — SPCX on Nasdaq — the access argument collapses on one specific axis: any investor who wants SpaceX exposure after June 12 can buy it directly, without paying the SMT wrapper. The prior thesis was that SMT's illiquidity discount was a tax worth bearing because the underlying was otherwise unreachable; the IPO eliminates the reason to pay that tax on this particular holding.

The counter-signal here, as a condition on the prior thesis, is that SMT's discount or premium to NAV has historically moved on the composition of its private holdings, not on any single name. If SpaceX exits the private bucket and SMT simultaneously deploys into other pre-IPO assets, the structural access argument survives — it just rotates to a new set of names. The question the market is now pricing is whether Baillie Gifford can replace a $1.25 trillion illiquid anchor with equivalently scarce, equivalently large private exposure fast enough to prevent a structural de-rating of the premium.

The May 18 treasury share sale answers part of that question, but not in the direction the consensus expects. SMT selling 1.7 million treasury shares before the IPO is not a celebration of upcoming NAV uplift. It is a signal that the trust's own managers assessed the current share price as rich relative to where they expect it to trade once SpaceX's illiquidity premium is publicly resolved. Trusts sell treasury shares when price is at or above fair value; they buy them back when price is below. The timing — before the IPO, not after a confirmed $1.75 trillion listing — places the sale in the window of maximum uncertainty about SpaceX's public price, which is precisely when a treasury sale carries the most information.

The 93x Revenue Multiple and What It Forces SMT to Price

At $1.75 trillion, SpaceX trades at roughly 93 times 2025 revenue of $18.67 billion. That multiple is not a rounding error — it is the explicit bet that Starlink's $11.38 billion in profitable revenue is merely the cash engine financing something whose economic scale is not yet visible in any income statement.

The structural problem this creates for SMT is that the trust now carries SpaceX at $1.25 trillion — a carrying value the prospectus implies is conservative relative to the $1.75 trillion IPO target. A successful listing appears to mark up the NAV by the difference, and the consensus trade is to own SMT into that re-rating. But the 93x revenue multiple means the re-rating is conditional on the market accepting a valuation architecture that finance professor Jay Ritter described bluntly: even if Starlink generates tens of billions, the money could be burned on Mars missions.

The specific tension this introduces for SMT's NAV is not whether SpaceX lists successfully — it is whether the post-IPO public price holds at or above $1.75 trillion once the 377-page prospectus is in the hands of public market participants who price on fundamentals, not on access scarcity. Q1 2026 reported losses of $4.3 billion on revenue of $4.7 billion — a company that lost nearly as much as it earned in a single quarter. Public market price discovery on those numbers, without the private market premium for scarcity, could settle at a multiple that is lower than the carrying value SMT currently holds. That outcome does not show up in the consensus NAV uplift narrative.

The relative-value gap this opens is between SMT's carrying value of $1.25 trillion and whatever public price discovery sets as the clearing level. If public markets price SpaceX on Starlink unit economics rather than on Musk ambition premium, the clearing multiple compresses — and SMT's largest single position reprices downward against its current book. The prior condition that protected SMT from this outcome was that there was no public price to compare against.

Axon and the Replacement Rate Problem

Baillie Gifford's Q1 2026 accumulation of 2.5 million shares in Axon Enterprise — a 50% increase in its holding, purchased while Axon traded below $400 against an average analyst target of $649 — is the operational answer to the replacement rate problem. The firm is signaling that it is actively rotating capital toward the next illiquid-to-liquid thesis before the SpaceX cycle completes.

Axon's fundamentals support the entry: $807 million in Q1 2026 revenue, 34% year-on-year growth, and the ninth consecutive quarter of 30%-plus expansion. Analysts project $3.65 billion for full-year 2026, implying continued 31% growth. But the more important question for SMT's structural argument is not whether Axon is a good stock — it is whether a publicly listed, mid-cap security with a published analyst consensus can replicate the access-scarcity premium that SpaceX private provided.

The answer is no, and that asymmetry is what the treasury share sale made visible in advance. A publicly traded Axon position does not offer the same structural argument for an SMT wrapper that a pre-IPO SpaceX stake did. Retail investors can buy Axon directly; they cannot buy SpaceX private. The trust is transitioning, in real time, from a portfolio anchored by unreachable assets to one that increasingly resembles a concentrated active equity fund — a structure the market prices at a discount to NAV, not a premium. The monitoring variable is the pace at which Baillie Gifford sources genuinely pre-IPO, large-scale private exposure to rebuild the access argument — and the SpaceX IPO wave, which includes OpenAI and Anthropic also targeting 2026 listings with a combined raise exceeding $100 billion, is simultaneously draining the pool of pre-IPO names that justified the wrapper premium in the first place.