The stock market has been buzzing with excitement as Seraphim Space Investment Trust (LSE: SSIT) saw its shares surge by a whopping 11.8% on 14 March, closing the day at 61p. This impressive jump marked a remarkable 135% increase since hitting a low of 26p back in July 2023.
Seraphim, a £146m investment trust, focuses on investing in early and growth-stage private businesses within the space technology sector. This makes it an attractive option for investors looking to capitalize on the thriving space industry. But is it a wise investment choice?
Delving Into Seraphim
- Seraphim holds a diverse portfolio of approximately 22 investments across sectors like satellite communications, Earth observation technology, and space-related data analytics. Many of these holdings are lesser-known small private companies, offering investors exposure to unique opportunities in the space industry.
Top 5 Holdings as of December 2024
- ICEYE – Earth observation (21.9%)
- D-Orbit – In-orbit services (13.5%)
- ALL.SPACE – Ground terminals (11.9%)
- HawkEye 360 – Earth observation (9.2%)
- LeoLabs – Space traffic monitoring (5.5%)
The recent share price surge followed the release of the trust’s results for the six months ending on 31 December. The fair value of the portfolio saw a notable 7.3% growth to £216.3m, leading to a 5.1% increase in net asset value (NAV) to £239.7m.
Numerous positive developments contributed to this growth, including an increase in the fair value of ICEYE and a successful fundraising round by Skylo, which raised $158m. Additionally, the trust made investments totaling £5.1m in four existing positions during this period.
With half of the portfolio securing 71% of the total fair value having over 12 months of cash reserves, Seraphim appears well-positioned financially. Furthermore, the prospect of an IPO by Voyager Technologies and the partnership between Skylo and Verizon for satellite-based mobile messaging in the US bode well for the trust’s future.
Riding the Space Trends
Seraphim’s Chair, Will Whitehorn, identified two significant space industry trends – the US administration’s focus on innovative solutions for Mars missions and defense spending efficiency, and Europe’s efforts to enhance its defense capabilities. This aligns with the strengths of the trust’s three largest holdings, which boast "world-leading capabilities" already in demand by defense departments in Europe and the US.
Assessing the Risk
Despite its promising prospects, some portfolio companies are running low on funding, necessitating future capital injections to stave off bankruptcy risks. Moreover, the competitive nature of the global space market poses challenges, with success far from guaranteed even as the industry expands.
Currently trading at 61p, the trust’s shares are at a substantial 40% discount to the underlying NAV per share of 101p. While this discount may seem enticing, it also reflects investor caution regarding the trust’s potential for growth.
A Cautionary Tale
While the global space industry’s projected growth to over $1 trillion by 2040 presents an appealing investment opportunity, the speculative nature of the space trust gives pause. An assessment of commercial progress among the top holdings would be prudent before considering investment options.
In conclusion, Seraphim Space Investment Trust presents a tantalizing opportunity for investors seeking exposure to the burgeoning space industry. However, the inherent risks and speculative nature of the trust warrant a cautious approach. As the space industry continues to evolve, staying informed and vigilant will be key to making well-informed investment decisions.
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