James Carthew: Seraphim’s galactic discount closing as turnaround takes off

Seraphim Space cratered soon after lifting but now seems to have momentum on its side.

I last wrote about Seraphim Space (SSIT ) back in August 2024. At the time, the trust was trading on a 43% discount, but its fortunes have been transformed since then. Investors who took a leap of faith at the time, when the shares were trading at 55.4p, are now sitting on a 45% gain. However, with the company still trading on a 20% discount and excitement building within the portfolio, there could be more to go for.

The rally really took off in May this year. SSIT had been highlighting its exposure to the burgeoning defence sector for a while, but in April the trust published a white paper on the role of that SpaceTech could play in Europe’s defence, especially in the context of the US playing a smaller part in this. This appeared to be the moment when investors finally woke up to what this could mean for the portfolio.

SSIT identified eight European holdings with defence-related exposure and a further 16 outside Europe. It reckons that SpaceTech will account for a growing proportion of growing defence budgets. Applications include surveillance, secure communications, and navigation. SSIT pointed out that much of this technology can also be used for peaceful purposes.

Sadly, we can see the use cases for this technology demonstrated in Ukraine – from the use of Starlink (not in SSIT’s portfolio) as a communications tool, to the dramatic increase in the use of drones guided by GPS, and the use of satellites to identify targets and monitor troops and equipment.

Each month, SSIT publishes a roundup of news on its investments and the wider sector. This, and the manager’s publications, which include its quarterly reports on private equity investment in SpaceTech, are the best sources that I have found for this kind of information.

While the sector has a long history, many of the companies in SSIT’s portfolio are still relatively new, and many will need to raise more finance. At the end of March, SSIT said that 62% of its portfolio was fully funded through to profitability and a further 11% was funded for at least 12 months.

However, money is pouring into the sector. Seraphim reckons that Q2 2025 was the second-best quarter on record for fundraising by SpaceTech businesses, with $3.1bn invested across 171 deals.

SSIT has benefitted from a handful of initial public offerings (IPOs), most recently from that of Voyager Technologies, which IPO’d at $31 and is now at $42. However, as many new companies opt to stay private for longer, SSIT also finds itself as an investor in a handful of businesses that are now valued as unicorns (over $1bn).

The portfolio

One of these is its largest investment, ICEYE, which accounted for 25% of the portfolio at end March. This Finnish company is focused on synthetic aperture radar (SAR) satellites. These can penetrate cloud cover to image the Earth night and day, in fine detail if needed.

There are many use cases for this technology. To give some examples from just the last couple of months, in the recent Texan flooding, ICEYE was sharing data on flood water with local and federal agencies. It is also providing weather monitoring services to insurers and reinsurers. ICEYE is now supplying data to NATO Allied Command Operations and a number of European armed forces. It has announced tie-ups with Rheinmetall, Safran, and Japan’s IHI Corporation.

This morning, the Financial Times has a story that Poland’s national development bank plans to buy a stake in ICEYE that will value it at ‘significantly higher’ than $1bn. The money will help fund ICEYE’s plans to greatly expand its satellite network.

The trust’s econd-largest investment (14%), D-Orbit, is focused on space logistics – moving stuff around once it is in orbit. Over the last couple of months, D-Orbit has announced a new deal to secure launch capacity from SpaceX. SpaceX gets the payloads into space, then D-Orbit’s ION Satellite Carrier manoeuvres satellites into their desired orbits on behalf of a wide range of customers.

SSIT is still making new investments. Most recent of these was into nuclear battery company Zeno Power. It just raised $50m of funding to pursue its goal of developing Strontium-90 batteries for the US Department of Defense and NASA. NASA intends to use these to help power its planned lunar base and hopes to test the viability of this with a mission in 2027.

SSIT launched in July 2021, one of the last clutch of trusts to IPO before the window closed almost completely. In retrospect, some of those companies were just riding the tail end of a wave powered by low interest rates. Many of those struggled once rates began to climb and some have already been liquidated or taken over.

It would be too easy to lump SSIT in with this group. After all, growth capital trusts were some of the hardest hit in 2022 and its own discount widened dramatically. However, I think that would be unfair.

All early-stage investments need time to come good. It is encouraging that after four years, SSIT is already demonstrating its potential, albeit the end-March NAV was only marginally higher than the 100p per share launch price. There have been some failures along the way, but this is typical for growth capital investing. The successes should eventually outweigh these, and we may soon see SSIT’s NAV accelerate. Hopefully, the share price will keep pace.

James Carthew is head of investment company research at QuotedData.

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