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Scottish Mortgage slashes private company valuations

A choppy first half takes its toll as some write-downs approached the 80 per cent mark
Scottish Mortgage slashes private company valuations

Scottish Mortgage (SMT) applied a swathe of write-downs to its unlisted holdings in the volatile first half of 2022 as inflation and other macroeconomic worries helped put the brakes on the valuation of tech and other growth-focused companies. 

The trust, which had a 30.2 per cent allocation to 52 private companies at the end of June, made 351 changes to valuations across 83 different instruments, with 96 per cent of the private portfolio undergoing at least two revaluations and 44 per cent undergoing at least five. Some write-downs came to around the 80 per cent mark, while the average change in private company valuation within the trust amounted to a 22.8 per cent fall. A small number of holdings were revalued up.

The trust, which has seen its share price fall a third year-to-date, claims to have limited the pain by its investment team often holding preference stock, which can offer better downside protection than ordinary shares, and by not marking up the valuation of private holdings on the back of comparators’ frothy initial public offering (IPO) and special-purpose acquisition company (Spac) activity.

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