Editing Seraphim Space Investment Trust

Seraphim Space LLP (Seraphim Space), which manages the Seraphim Space Investment Trust (SSIT), believes the space technology market could grow 5–7x to c $2–3tn by 2035. Key drivers are the dramatic fall in the cost of launch, principally thanks to SpaceX, and a revolution in the satellite industry where technological developments originally pioneered within the smartphone and automotive industries have driven down the size, cost and weight of satellites while expanding their capability. In combination, these factors have increased the scale of deployment – creating a digital infrastructure in space according to Seraphim Space – enabling technologies in data collection and analytics to address key global needs in the climate, connectivity, mobility and security domains. SSIT is a unique listed vehicle giving investors access to that growth via a portfolio purely focused on space technology through predominantly unquoted early-stage growth companies. Its strategy is to invest for the long term, seeking companies that are leaders in their segment with a first-mover advantage and strong capital structure. Seraphim Space is a pioneer in space tech investment and has built deep knowledge networks. It is an early mover with a reputation for sourcing opportunities and partnering with other investment groups and corporates.

The analyst’s view: For the adventurous investor

SSIT provides investors with a unique proposition for investment in potentially high-growth disruptive space technology. Seraphim Space generated a 49% internal rate of return (IRR) via its former private limited partnership (LP) fund, with the majority of those holdings seeding SSIT in July 2021. SSIT is targeting long-term annualised returns of 20% pa. Given SSIT’s focus, it should appeal to growth-orientated investors with long-term investment horizons and a suitable attitude to risk. Such risks include potential failure of technology, illiquidity and additional funding requirements. However, Seraphim Space aims to mitigate these through its sector-specific focused investment strategy, strong advisory board and broad networks. In addition, SSIT’s portfolio is heavily focused on climate and sustainability applications. The portfolio is still heavily concentrated, with its end December 2021 top five positions accounting for 55.9% of net asset value (NAV). However, we expect SSIT to deploy its c 27.9% (c £70m) cash holding to become fully invested over the next six months, which would diversify the portfolio further. In the medium term, SSIT may well look to raise further capital for new investments or to fund existing holdings through follow-on rounds and has an identified pipeline of c £88m of potential investments.

Market volatility and NAV lag drive the discount

SSIT shares have a short trading history and since launch have traded in a range of 90–133p versus SSIT’s latest (end December 2021) NAV of 104.7p. SSIT has a niche appeal and a scarcity factor, which is likely to lead to continued fluctuations in the near-term premium amid market volatility. Over the long term, the shares will be driven by the performance of the underlying companies and the overall growth in the commercialisation of the space domain.