Seraphim Space Investment Trust (LSE:SSIT) is a good example of why penny stocks are popular with some growth investors. In less than three years, its market cap has ballooned from less than £100m to £444m. Those who invested £10,000 at the end of June 2023, will today (6 June), be sitting on shares worth £69,630. That’s an overall gain of 596%.
However, there are plenty of examples of rapidly-growing stocks that run out of steam. Could Seraphim be one of them? Or is its share price likely to blast off into orbit? Let’s discuss.
Unfamiliar names
With the SpaceX IPO less than two weeks away, there’s currently plenty of interest in the sector. But Seraphim doesn’t have a stake in Elon Musk’s business. In fact, the “world’s first SpaceTech investment company” has positions in companies that, I suspect, are probably only familiar to those who work in the industry. And because they are unlisted without a ready market for their shares, they can be difficult to value.
As of 31 March, the trust’s largest shareholding, ICEYE, accounted for 47.1% of its net asset value. Impressively, it “operates the world’s first and largest constellation of miniaturised satellites that use radar to image the earth both during day and night, even through cloud.”
Our entrepreneurs see the infinite possibilities of Space and transform those possibilities into game changing companies. Our portfolio companies are at the frontier of tomorrow shaping a better future on Earth.
Company website
A finger in many pies
One of the attractions of an investment trust is that it’s possible to have exposure to a large number of companies through a single shareholding. This helps spread risk.
However, Seraphim is 100% exposed to a niche sector that’s in its relative infancy. It’s unclear who the winners and losers might be. Having said that, there’s enormous potential. The trust’s impressive track record of growing its net asset value (NAV) suggests its fund manager is good at spotting potential.
| Measure | 31.3.26 | 31.12.25 | 30.6.25 | 30.6.24 | 30.6.23 |
|---|---|---|---|---|---|
| Net asset value (£m) | 421.3 | 337.5 | 281.1 | 228.1 | 222.4 |
| Net asset value per share (pence) | 177.6 | 142.3 | 118.5 | 96.2 | 92.9 |
| Portfolio valuation (£m) | 433.3 | 331.6 | 259.8 | 201.5 | 187.4 |
| Market cap (£m) | 355.8 | 284.6 | 203.0 | 129.5 | 64.6 |
| Share price (pence) | 150.0 | 120.0 | 85.6 | 54.6 | 27.0 |
| Discount (%) | 15.6 | 15.7 | 27.8 | 43.2 | 70.9 |
And the narrowing of the discount at which Seraphim’s stock trades to its NAV is a good indicator of investor confidence. In fact, towards the end of May, the stock was trading at a premium of over 50%.
What’s going on?
However, the trust’s share price has fallen over 30% since 22 May, a couple of weeks before it published its latest results. This sudden drop makes me nervous even though there’s no apparent reason for the fall. After a stellar run, shareholders have been brought down to earth with a bump.
But rather than be a cause for concern, this could be an indication that the City has recognised that Seraphim’s share price had become disconnected from the value of its underlying investments. Indeed, the trust’s market cap is now almost the same as its latest (31 March) portfolio valuation.
I like the idea of investing in the space industry. With its large position in SpaceX, it’s one of the reasons why I have a stake in Scottish Mortgage Investment Trust. And I can see the potential of some of Seraphim’s portfolio companies. But the rapid share price movement makes me nervous. I would like to see a period of calm before revisiting the investment case. Until then, I think there are lots of other exciting opportunities to consider.
Should you invest £5,000 in Seraphim Space Investment Trust Plc right now?
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James Beard owns shares in Scottish Mortgage Investment Trust plc.
