Baillie Gifford’s Schiehallion offsets concerns about private company values with NAV growth

Schiehallion, the Baillie Gifford private equity investment trust, said on Thursday that during the financial year to 31 January 2024, its ordinary share net asset value (NAV) returned negative 0.9 per cent.

However, amid negative market sentiment towards its investments and challenging macroeconomic conditions, the company’s share price returned negative 22.3 per cent.

During the year, Schiehallion’s share price discount to NAV widened to 40 per cent from 23 per cent, which the company said came “as sentiment remained against growth stocks and private company investments”.

During the period from its launch in March 2019 to 31 January 2024, Schiehallion’s ordinary share NAV returned positive 18.8 per cent, while its share price returned negative 28.5 per cent.

Schiehallion invests in private businesses that it believes have the potential to become publicly traded, including SpaceX, Wise and Bytedance, the parent company of TikTok.

At the end of the reporting period the five largest holdings in the fund were SpaceX, Wise, Affirm, ByteDance, and Bending Spoons.

Its stock price improved in 2024, with shares up eight per cent year over year.

The company announced last November that it intended to launch an up to $20m (£15.8m) share buyback programme in a bid to narrow its widening discount to net asset value.

It revealed on Thursday that in the three months to 31 January 2024, it bought back 2.6m shares at a cost of around $1.9m (£1.5m). Since then, it has bought back an additional 1.1m shares.

During the financial year, Schiehallion’s net revenue return per ordinary share was negative 0.12 cents (0.095p), compared with negative 0.98 cents (0.78p) the year before.

Schiehallion’s board has no dividend target and recommends that no final dividend be paid for the last financial year, saying its priority was generating long-term capital growth.

Although Schiehallion has frozen its director remuneration for this year, the board is asking shareholders to approve an increase in the aggregate fees that may be paid to directors to £430,000 per year from £360,000 per year. It argues that the increase would give “additional flexibility for future board planning”.

The company’s chair Linda Yueh said: “The past year has been characterised by geo-political tensions, inflationary pressures, higher interest rates, increased cost of borrowing, and a recessionary environment.

“The Israel-Hamas conflict worsened the uncertainties in the global economy. Although inflationary pressures have begun to ease, these factors have collectively contributed to a challenging economic and market environment.”

She added: “The potential of the companies in our portfolio is generally dependent on their ability to take advantage of opportunities. Therefore, the board is positive about the growth prospects of these companies, and the pipeline of private companies that the investment manager has access to.”