- Activist Elliott halves stake
- Discount to NAV narrowed to 6%
- Elliott maintains big holding
Activist investors usually prepare for a long and hard-fought battle when targeting underperforming companies and management teams. It must therefore be rather pleasing when events conspire to allow a profitable early partial exit.
That seems to be the case for Elliott Investment Management after the investor revealed it has roughly halved its position in Scottish Mortgage Investment Trust (SMT) to under 5% of total outstanding shares after the market close on 10 May only months after building up its stake.
The Baillie Gifford-managed trust, known for taking long-term bets on what its managers believe are exceptional growth companies, announced a £1 billion share buyback (15 March) to address the trust’s deep discount to NAV (net asset value).
As part of the programme the trust conducted a 35 million share repurchase at 895p (8 May). Analysts at Stifel believe the vast majority or perhaps all of the shares were bought from Elliott.
LAUGHING ALL THE WAY TO THE BANK
Stifel said Elliott started accumulating a position in the summer of 2023 when the shares traded at between 640p and 700p, representing a discount to NAV in excess of 20%.
At the middle of the range, this implies Elliott has locked-in a 34% profit as the discount to NAV has shrunk to approximately 6% based on the most recent NAV of 950p.
Stifel analyst Iain Scouller commented: ‘This appears to be Elliott realising some sizeable profits, but at the same time they remain one of the largest shareholders and they are likely to continue to give the board clear views as to how shareholder value could be enhanced in the future and keep their ‘feet to the fire’.
‘We assume that if any other shareholders also want to exit a large or small position in Scottish Mortgage’s shares in the market into the buyback, the board will be quite happy to facilitate this in the same way that they have accommodated Elliott’s realisation.’
AJ Bell investment director Russ Mould asks: ‘Is this the shortest activist investor campaign in history? Less than two months after declaring a 5% stake in Scottish Mortgage Investment Trust, Elliott has started to sell down its holding.
‘Whereas some previous activist campaigns against investment trusts have had a long list of demands, such as the ones around Alliance Trust, it’s fair to say that Scottish Mortgage was a much simpler one to comprehend. Do something to narrow the discount to net asset value and sell some of its private holdings as it might get a better price than was attributed by the market.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor (James Crux) own shares in AJ Bell.
