Mark Boggett, CEO of Seraphim Space On The Space Sector Being A Multi-Trillion-Dollar Investment Opportunity

Welcome to the Good Money Guide podcast. I’m Richard Berry. And today I’m joined by Mark Boggert, CEO of Seraphim Space, which manages Seraphim Space Investment Trust, the world’s first listed space tech fund and one of the best performing investment trusts over the last few years. Now, space is one of the most exciting areas of technological innovation at the moment, with applications ranging from defense, communications, climate monitoring and satellite technology. But is it also a good place to invest?

Richard Berry (02:04)

So today we’ll be talking about the opportunities in the space sector, what’s happening in Sarah Finn’s portfolio, whether space stocks are still in a bull market and what the future holds for the space industry. As well as discussing investment trusts and ETFs, we’ll also find out a bit more about Mark, how he personally invests and hopefully get some tips on how people can become better investors, obviously without it being financial advice. But Mark, welcome to Good Money Guy.

Mark Boggett (02:30)

Thank you for having me on the show.

Richard Berry (02:32)

What’s the fascination with investing in space?

Mark Boggett (02:35)

So I’ve spent my entire career as a frontier technology investor. And what’s been happening over the last decade in space is the convergence of technologies. So previously, space, when we had the original space race between the US and Russia about getting man to the moon, there was huge amounts of technology development and huge amounts of spin-offs that came from that, things like LED lights and Bic pens and Velcro.

Mark Boggett (03:05)

What happened over the following 30 years was that space became very risk averse. It was so expensive to launch a satellite. It was so expensive to operate them that the risk of failure was the key focus. So that led to pushing back on new hardware, new software that could improve rockets or improve these satellites. And all of that has really changed in the last decade.

Mark Boggett (03:35)

where the conversions of technologies from other adjacent sectors is really upon space. So 3D printing is a great example. This is one of the things that’s made SpaceX such a revolutionary business. Then we’ve got AI, of course, which is impacting every industry, but as I’m sure we’ll come in and talk about space in particular. And then there’s a whole range of other technologies that are impacting space from nuclear to

Mark Boggett (04:04)

to robotics. So having spent my earlier career focused on all of these technologies, there was a recognition that space was really going to go through a period of significant change as a consequence of embracing these new technologies, but in doing so, create a multi-decade, multi-trillion dollar market opportunity.

Richard Berry (04:26)

Okay, so you didn’t want to be an astronaut when you were young. You fell into it as an opportunity rather than a…

Mark Boggett (04:31)

Yeah, I’m an investor, a technology investor throughout my entire career. So my focus is certainly around making a profit. And that has really, really distinguished us as an investor in this sector, but also sort of keeps us focused on the reason that we’re doing that, why we’re doing it. Many of those that are involved with the space sector are in love with the space sector and that clouds judgment. And we’ve found it

Mark Boggett (04:59)

much better to be focused on the one thing which is how do we make money out of this?

Richard Berry (05:04)

That’s a very, very, very focused, very focused approach. We’ll get into your actual investments and dig a little bit deeper into the portfolio in a minute. But Seraphim Investment Trust, what does it do differently from other space sector investments out there? Is there anything sort of unique about Seraphim we can focus on?

Mark Boggett (05:21)

Yeah,

Mark Boggett (05:23)

sure. So let me just take a step back and tell you more about Seraphim rather than Seraphim the investment trust, just to put this into context. So first of all, as a manager, we were the first ever to launch a space fund, which we did a decade ago. We also then operate a range of activities that sort of sit alongside that, are complementary. We run an accelerator program globally, the world’s largest space accelerator program. So that takes startups from universities around the world or teams out of SpaceX.

Mark Boggett (05:51)

and helps them incorporate and then access their first capital. Our venture funds invest in the early stage rounds. So these are private venture funds. They’re taking the highest amount of risk on these technologies. And then we have the investment trust, which is our growth fund, which invests at the stages when we have a company where the technology risk is retired, but there’s still the execution risk of scaling that business. So that’s where the investment trust is focused.

Mark Boggett (06:19)

that’s what we have as a sort of unique ecosystem. Nobody else in the world has anything that looks like that. And that results in us receiving a massive amount of deal flow. So we’ve seen 10,000 private space companies over the last decade. And that gives us an information asymmetry.

Mark Boggett (06:38)

that others don’t have. So when we see a new company, we can identify who its three or four competitors are. When we see a new technology, we can identify with conviction whether anybody else is doing that technology and invest rapidly if it’s not. And this is really how we have this ongoing advantage. But the other thing, particularly looking at through the eyes of the investment trust, our growth fund, is that these stats will help you understand.

Mark Boggett (07:06)

So we have companies that go through our accelerator programs. We’ve done 15 cohorts of 10 companies over the last decade. And in our venture funds, about a third of the companies that we invest into come from our accelerator program. So these are companies we’ve got to know, understand the management team, and how they’re approaching a particular market. And it really builds conviction before we invest. So then if you look at our SSIT, our growth funds, about

Mark Boggett (07:34)

just over half of the companies in that portfolio have come from our venture fund. So these are companies where we’ve been sitting on the board of them for many years. We really know them from the inside. That means we understand the challenges that the management team have gone through, which means that we build up conviction over time. So when there’s an opportunity to invest in a growth round, and we’re doing that through the investment trust, we’ve got highest conviction when we’re already on the board and we really know these companies in depth.

Richard Berry (08:04)

And what companies in the portfolio are you most excited by? Must be very interesting to nurture them from.

Mark Boggett (08:11)

It’s fantastic. It really is. well, let me give the answer to two of those. So the first one I’ll talk about is one that went into our accelerator program before it was even formed. The founder was still at university and agreed to come on the program. He went on to our accelerator program, succeeded on that. We then backed them through our venture fund. And then more recently, we’ve been backing this company through our growth fund.

Mark Boggett (08:40)

SSIT. So this is a business that we know from inside out and our conviction has been growing. So it’s called Zona Space Systems and what they do is they do GPS, private GPS. So why do we need a private GPS? So the answer is, and I’m sure this will be familiar to your listeners, that the actual GPS that’s publicly available and free doesn’t work that good. It’s not accurate. It’s one to 10 meters accurate.

Mark Boggett (09:08)

But more importantly, it’s not secure whatsoever. It’s very easy to spoof or to block the signals. So you can’t actually rely that the information that you’re relying upon is real. And that becomes into sort of sharp focus if you’re using GPS to navigate your autonomous vehicle. So there’s a lot of markets where understanding the accuracy and understanding the security are imperative.

Mark Boggett (09:35)

So this is the world’s first company that is established to do GPS. And they are growing very quickly. This quarter, the FCC in the US has given them a license to be able to use the spectrum for GPS, which means that their signals can now be identified by 8 billion existing end devices in the market. And we believe that a significant proportion

Mark Boggett (10:04)

of those that use GPS would be willing, if they have the opportunity, to pay to have accuracy, to pay to have security. If you think about autonomous vehicles, if you think about drones, if you think about humanoid and robots, the markets that are going to require this precision are endless. we’re excited to be in this sort of leading company that is changing this market. So that’s one of them.

Richard Berry (10:33)

just on that. How is their GPS more accurate than the general GPS?

Mark Boggett (10:39)

So some of this comes down to distance. all of the government GPS satellites are in MEO, mid-Earth orbit. And the satellites that are produced by Zona are in low-Earth orbit. So they’re closer to the ground as a consequence of that. And they’re able to be more precise about the location as a consequence. So they’re sub-centimeter accurate.

Mark Boggett (11:08)

But what it also means is because they’re closer to the ground, the signals are also a lot stronger, which means that they work better inside buildings and in under bridges and in the city, you know, where a lot of these signals sort of bounce and cause some real challenges. But to go back to the most important point is about the security. If you can’t rely that nobody has tampered with the signal that you’re relying upon.

Mark Boggett (11:37)

You you just can’t use that for an autonomous vehicle. And this is the reason why you see this way most driving around London now with these huge sensors on every corner, because they just can’t rely on GPS. But you can’t take those huge sensors and apply them to a drone or to a robot. We really need to fix the GPS problem. And that’s what this company is doing. So.

Mark Boggett (12:01)

We see this company, we’re really excited about this business. In fact, we’ve just announced only this week that we’ve put more money into this business. The valuation has significantly increased. So this is now a very significant holding within our portfolio. So yeah, that’s Zona.

Richard Berry (12:22)

the roadmap for a company like that? Would it be private funding from a firm like yourself and then listing on an exchange?

Mark Boggett (12:31)

So the way that it works is private equity funding from investors like us until they’ve got to the stage where they are right now, which is that they have got their satellites into orbit, proven that they work. Once you’ve got sort of the proof that these work, you’re then able to start using debt to partially build out the constellation. They’ve raised more equity earlier this year to…

Mark Boggett (12:58)

to build out their factory, which they’ve developed and to buy the components that they need to build a couple of hundred of these satellites. So this is a company that is vertically integrated and that’s a point that we might want to come back to later. And they also then have grants from governments. So they’re working closely with, this is a US company based in California.

Mark Boggett (13:26)

So the USDDOW is providing a whole range of grants to accelerate their rollout. And then they start to get early engagement with customers. And I’m sure it wouldn’t be a surprise that all of the automotive companies, this is exactly what they need in order to be able to provide better quality service and autonomy to their vehicles going forward. So that’s an area that there’s a significant amount of interest from.

Richard Berry (13:55)

I know you mentioned a second company as well. Just very quickly, whilst we’re talking about private markets, obviously there’s a big push for private market investing in the UK. You’ve got Pisces being launched and winter floods with their wrap service. What’s your view on retail investors getting involved in private markets?

Mark Boggett (14:13)

Yeah, well, the sad reality of the world, not just the UK, is that private companies are staying private for longer. a significant amount of growth is being enjoyed by those companies and they are very difficult to access. So, I mean, this is the reason why we exist as an investment trust that’s a public company investing into private space companies.

Mark Boggett (14:38)

But there are many markets that remain really difficult to access. SpaceX is a great example of a private company that had a very significant shareholder base that retail investors were desperate to get an exposure to because who knew when that was ever going to IPO? And they took 20 years to do that. So that’s something that I don’t think is going away. So there needs to be different ways

Mark Boggett (15:08)

for investors to get access to these incredible private companies.

Richard Berry (15:12)

Were you surprised by how the price reacted when it came to market? And do you think, what do you think the future of SpaceX is going to be?

Mark Boggett (15:24)

So I wasn’t surprised that the IPO was well received, oversubscribed, because this is a fantastic company that’s already changed the world in many ways. I think that Elon has a sort of track record doing that in other sectors. And there’s a belief in his ambition. So no, I wasn’t surprised.

Mark Boggett (15:52)

that the IPO was successful and traded well in the aftermarket. Where I am surprised is on a number of other measures. So first of all, on the positive side, it’s really brought a new focus for institutional investors in space as an asset class. Before the SpaceX IPO, institutional investors were barely dipping a toe into the space market.

Mark Boggett (16:20)

and still seen as too niche and too risky. And now the SpaceX IPO has brought this into mainstream. And that’s really through a number of factors. So first of all, defense has been sort of growing as a theme and a trend and institutional investors are increasingly finding how space is playing into that through its dual use capability. Dual use is something that we might want to come back to.

Mark Boggett (16:49)

But then there’s also a recognition from institutional investors of just how successful the Starlink internet has been that there’s now got 12,000 operational satellites in space. But the bit that has really captured the interest is how that is now going to translate from just providing internet to providing direct to mobile phone capability. So this is an emerging threat for the mobile network industry.

Mark Boggett (17:19)

And that’s an industry that these institutional investors have invested in heavily, made a lot of money in over the years and understand. So there’s a recognition that this market’s changing and it’s moving into orbit. And then the next thing that has really sort of taken everyone by surprise is really the potential that space can play in providing a data center capability and becoming part of the AI stack.

Mark Boggett (17:46)

and addressing some of the huge issues that we have about getting just enough energy to run these data centers. So there is now a institutional understanding that this is something that is coming. And again, they’ve spent decades investing into data centers successfully. They know and understand that. And this is the next evolution of that. So a combination of those three things has really brought about

Mark Boggett (18:12)

a massive renewed or not renewed new interest from every type of institutional investor. And we can already now see that being reflected in the numbers for the amount of private investment that’s going into the space market globally. Today, we’ve just released our quarterly publication. We produced something called the Seraphim Space Investment Tracker.

Mark Boggett (18:39)

which is available on our website for those that are interested to look at the detail. And what it does is it follows all of the global trends of private investment into this sector. And today we’ve announced that this quarter is a 20 billion dollar quarter. Last quarter was an 8 billion dollar quarter. The quarter before was an 8 billion dollar quarter. But the year before that was something like 12 billion.

Mark Boggett (19:07)

So that’s just putting into perspective how investment into the space sector has been really changed as a consequence of this focus around SpaceX and how the market dynamic is changing. Got one more point to make, which is obviously the sort of negative side of this. And I’m sure we’ll come back and talk about this at length. But whilst SpaceX has performed very well,

Mark Boggett (19:35)

in the market and has gone through a number of milestones during the last couple of months where a lot of the shareholders were locked in for a long period of time where that lock-in was expiring on sort of monthly basis during the course of the last couple of months. And the market was particularly concerned. Will everyone dump all of their stock? What will happen?

Mark Boggett (20:04)

to the share price as a consequence. And what we’ve seen on those dates is that there’s been more than enough buying interest to offset the selling interest. So the share price has been very robust and is up on their IPO price. That has been quite surprising to everybody, including me, who was really expecting the shares to really be weakening as a consequence of this heavy selling.

Mark Boggett (20:31)

The other thing that is a consequence of SpaceX is all of the other stocks globally, space stocks, what they all enjoyed for a period of time in the months in the lead up to the IPO was increased in valuation, massive amount of new investors coming into space, using all of the space stocks as a sort of proxy for SpaceX. The week of SpaceX, that then went into reverse, massive sell off in all of the space stocks.

Richard Berry (21:00)

rotation into space.

Mark Boggett (21:01)

rotation into SpaceX and what happened was that they all got oversold and they still remain in a very oversold position right now and then some of these companies and again I’m sure we’ll come on and talk about this because some of our portfolio companies have been hit by this we’ve got in the US we’ve got the midterms approaching and the market is increasingly concerned about what that’s going to do to the budgeting process for the US and by implication

Mark Boggett (21:30)

what that means for spending in defense. So all of the defense stocks have sold off and the defense related space stocks have sold off again on top of an already oversold position. there are some incredibly good priced space stocks at the moment that where they’re underlying businesses in great shape. But these two events have really

Mark Boggett (21:57)

led to a significant overselling of these stocks. So that’s all SpaceX related and the good and bad that’s come with it.

Richard Berry (22:06)

That was actually one of the questions posed by one of our analysts, which was, you know, with government budgets under pressure from rising interest rates, is it going to have an effect on funding for space programs?

Mark Boggett (22:20)

So what in times of increasing costs for debt and belt tightening, what do governments do? Well, they focus on what is mission critical and everything else can be cut. Space has become mission critical. And this is really the big difference that’s happened during the course of the last three years and has just been accelerating as our geopolitical situation gets worse. We started off with Ukraine.

Mark Boggett (22:50)

And then of course, we’ve got the Middle East and the two wars that are raging there. So what’s happened over that period is thanks to the US and their position on NATO, they’ve made it very clear that the Allies can no longer rely on the US for defence support. They need to stand on their own two feet. And this is especially true in space. So over the last 50 years, because the US was willing to pay for it,

Mark Boggett (23:20)

They built a best in class space based capability that all of the allies were completely reliant upon, but now they’ve been told that they can’t. And I don’t think it really matters if there’s a change of leadership. Once the genies out of the bottle and you’ve realized that you can’t rely on your ally, it’s time to invest to build that capability. It’s gonna take a decade to do that. It’s going to take the…

Mark Boggett (23:48)

hundreds and hundreds of billions of dollars to do that. And we are now just starting to do that. And those budgets are now coming through. They can be seen in our portfolio companies. And we’re only at the tip of the iceberg here. So this is something that is mission critical when it comes to sovereignty and resilience. And it’s not just around the obvious defense applications. It’s also around communication as well.

Mark Boggett (24:17)

at the same time that the US told us that they were going to no longer support Ukraine and pulled support for a 10-day period, that was the exact time that Elon suggested that he was also going to switch off to the Ukraine access to Starlink. governments around the world are now recognizing that they need to have their own space-based telecommunication infrastructure. The other thing that’s happening was that

Mark Boggett (24:47)

If you roll back five years or so ago, space was still only the preserve of the richest countries around the world. The cost of playing in space was so high that it was just out of reach of every country, other than the very largest. All of that has changed in the course of the last five years because space has become democratized. The satellites are smaller, lighter, cheaper. Access to space through SpaceX and others is now

Mark Boggett (25:16)

ultra low cost, which means that any country can now afford to have their own space solar and capability, sorry, not solar and sovereign capability. So the governments or the people within the countries are demanding this of their leadership that they’re looking at how are we going to get sovereign resilience now that it’s affordable. So all of this is happening all at the same time.

Mark Boggett (25:44)

and really accelerating. this is mission critical. we believe that these budgets that have been set to do these jobs are largely going to be delivered against. So we remain confident despite the sort of backdrop the bond market and all of the challenges that brings.

Richard Berry (26:06)

use. Do you think with everybody having their own sovereign space program, is orbit going to get overcrowded with mini satellites? is there… Who polices? How many satellites are allowed there?

Mark Boggett (26:21)

So, let me just put this into perspective. where we are today, there’s about 15,000 operational satellites in space today. And you won’t find a single analyst report that will tell you there’ll be anything less than 100,000 over the next decade. And I think that’s an underestimation. But that’s a significant increase from where we are today. So, right now, debris in space and collisions in space are something that people are mindful of, but something that…

Mark Boggett (26:50)

very rarely happens if ever. And that’s because space is pretty big. But it will become congested over time. So what this has done is has created a massive opportunity as well as a threat. And this has been obvious for quite a number of years. And as a consequence, we’ve been investing heavily into this area. So I’ll give you an example of a few of the businesses. So we’ve got one called Leo Labs. And this is a ground-based radar network.

Mark Boggett (27:18)

that has the capability to be able to look up into space and see something the size of a 10 pence coin from a thousand kilometers away. And if that isn’t amazing enough, that 10 pence is traveling around our world at 17,500 miles per hour. And what they’re able to do is they’re able to identify everything that’s that size and above, which includes satellites, in real time. And what they then do is they make that information available to the operators of the satellites.

Mark Boggett (27:45)

so that they can move their satellites out of the way of any potential danger. And they can do that autonomously if they choose. So right now, more than 75 % of the entire market that operates in space is one of their customers. Effectively, you can think about this as the sort of Google Maps for space. So that didn’t exist a few years ago, but now it does. So it means that you understand the environment that you work in. And it’s really the ground data

Mark Boggett (28:14)

for being able to add a lot more satellites into space. And if everyone agrees to use one set of data, you can then autonomously move satellites out of the way of any oncoming danger. The other thing that we’ve been investing into, so there’s a multi-trillion dollar market that’s been created in order to address this very problem, are companies like Astroscale and DeOrbit. And what they do is they are like the RAC van.

Mark Boggett (28:43)

When a satellite breaks down or it’s reached the end of its life, they’ll be called upon and they’ll go and tow that satellite and effectively push it into the Earth’s environment where it burns up. So there’s no debris in the space environment. again, these things didn’t exist five years ago and they exist today. know, a number of those companies are now valued in billions of dollars. And this is a giant addressable market that is going to increasingly be

Mark Boggett (29:12)

regulatory driven. So the regulators now have tools in order to be able to effectively manage the space environment that didn’t exist before. And what we’ve started seeing, for example, are fines for companies that haven’t removed their satellites once they’ve reached the end of their economic life. And the way of sort of dealing with this going forward is for a regulator to say to a company that wants to launch satellites, in order for us to give you a launch license, you must have a contract in place.

Mark Boggett (29:41)

with a company that will remove that once that satellite breaks or it reaches the end of its economic life. Or you have to have an insurance product that will effectively pay for that service. So the regulator has a lot more sort of control now because of these new capabilities to be able to sort of police that and make sure that space is sort of commercially open for decades to come.

Richard Berry (30:04)

what about espionage as well with so many different countries and powers vying for space? A technology like that where you can map getting out of everybody’s way is one thing, but what about the other side of the coin?

Mark Boggett (30:18)

Yeah,

Mark Boggett (30:18)

well, know, again, this is this has been really interesting to be involved with, Leo Labs, I was on the board of of many years and what they were seeing were Russian satellites around American important satellites, defence satellites, and they were letting the government know that this is going on. Having this sort of level of precision of understanding, you know, is something that’s really quite incredible. you know, they’ve released this to newspapers and

Mark Boggett (30:47)

let the world know that this espionage is going on. yeah, it’s now, it’s obviously been going on for many years, but now it’s something that can’t be done in secret.

Richard Berry (31:01)

see it happening. See it happening in real time. So we’ll move on to a bit more about the trusts and how it compares to ETFs in a sec. any other portfolio companies you’re really excited about?

Mark Boggett (31:14)

Well, I can’t come on a show like this and not talk about our largest portfolio company, iSci, which dominates the percentage holding. It’s over half of our NAV.

Richard Berry (31:28)

That

Richard Berry (31:28)

was another question from the outlist as well.

Mark Boggett (31:31)

And that is without apology. And, you know, I always sort of point at three I and say, you know, that’s done pretty well from having a single largest holding. But I also point to the fact that I say just happens to be our oldest child that sort of left university is now in the real world. And we have other children that are just graduating from university. Zona would be one of those.

Mark Boggett (31:57)

So we don’t expect there just to be one giant company forever. We expect there to be three, four, five, 10 other companies that sort of even it all out. That should be good news to investors because we’re talking about massive NAV growth there. And we are continually demonstrating quarter after quarter, incredible NAV growth, which I don’t think is being matched anywhere else in the entire investment trust market. This is the reason why we are.

Mark Boggett (32:26)

continually the top performing investment trust, over one, three, five years because of these massive markups in NAV of these companies as they start to really offer their services commercially and start to achieve success. So let’s just talk about ISI for a minute because it is a revolutionary company. It’s a European company that rules the world. And what they do is they have

Mark Boggett (32:54)

these miniaturized satellites and on the bottom of each of the satellites is a radar. And what they do using this radar is they look from space down at ground and they can see something the size of a pizza. the thing is that they’re able to see that day or night and they’re also able to see it through any kind of cloud cover and any kind of weather. So with their current constellation of about 70 satellites, they’re able to see every square meter of Earth every hour.

Mark Boggett (33:23)

And what they’re able to do is by using AI for change detection to determine how that square meter of Earth has changed in the last hour, the last three hours, the last day, month, year. So this is a view of Earth that we’ve never seen before. And as their constellation grows from 70, their revisit time for every spot on Earth goes down from every hour to every half hour to every 15 minutes to real time.

Mark Boggett (33:52)

So let me sort of put something into sort of context for people. If you think about GPS, the blue dot in your mobile phone that you rely on every day generates billions of dollars of enterprise value around the world. That blue dot has three pieces of information, longitude, latitude, and time. So the ISI equivalent would be a green dot. And that green dot has hundreds of pieces of information about what happened on that spot over time.

Mark Boggett (34:21)

but also what happened around the local vicinity over time. So we think that that is much more valuable and much more relevant to a broad range of growth themes, everything from defense to climate to food security to autonomous everything. The list just goes on. But then also to every industry that you can think of about finding ways to be able to use this data.

Mark Boggett (34:48)

There really isn’t an industry that’s not going to be able to embrace this data set in the same way that every single industry has found a myriad of different ways of leveraging GPS.

Richard Berry (34:58)

Okay, so we’re get a live Google Earth at some point.

Mark Boggett (35:02)

That’s

Mark Boggett (35:03)

effectively what it is. And this is the reason why this company today is valued at 10 billion euros. But you’re absolutely right. If you think about Google Maps, you could think about things like, you know, potholes in the road or, you know, roads that have just closed because of roadworks or whatever it might be. So, you know, just the simple things that parking spaces, you know, as you’re as you’re driving into a town.

Mark Boggett (35:29)

It could identify which yellow lines you can currently park on and which ones are available right now. These are the things that we’ll feel on a day-to-day basis. how businesses can use them is really the big thing here. Well, first of all, defence. There’s obviously a lot of applications for defence. Ukraine’s been using this very effectively since the war started, which really has acted as a shop window for the defence community around the world.

Mark Boggett (35:59)

But there are just so many ways that this data is going to change industries. It’s going to enable cost saving. It’s going to enable companies to make more profits, provide a better service to their customers. The list is endless. So we believe that this company has the potential to become worth hundreds of billions. And the most valuable space company is currently worth about $2 trillion.

Mark Boggett (36:24)

So why can’t a company like this be worth hundreds of millions of dollars? We believe that it will be. And this is the reason why we’re totally unapologetic about how brilliantly this is doing in our portfolio in driving nav. And we’re not in any hurry to start trimming that. In fact, we are focused on making sure that there are other portfolio companies that grow just as big rather than just focusing on the one that’s done exceptionally

Richard Berry (36:50)

Have you

Richard Berry (36:51)

reinvested in it over time or is the percentage of the portfolio just a result of the valuation of the company?

Mark Boggett (36:58)

So

Mark Boggett (36:58)

in this company we haven’t reinvested since it first came into the fund. We acquired our stake, we invested at the same time another $25 million. So it’s about $50 million original investment and it’s sort 10x that now and we believe that we can do another 10x on that.

Richard Berry (37:19)

We’ve spoken a bit about NAV, so Net Asset Value. One of the things about investment trusts is they often trade at a discount to their net asset value. It’s quite an attractive proposition for investors sometimes. Why do investment trusts always trade at a discount?

Mark Boggett (37:37)

Well, the investors take a view on the real value of the underlying assets. for example, right now in the space market, we have a significant sell-off in the value of many of the listed space companies around the world. And yet that’s not something that’s filtered through into the private market. There are specific reasons for that.

Mark Boggett (38:08)

in the public markets. So investors are sort of questioning, you why is there a difference in the approach to valuation between the public and private markets? So that’d be a sort of current example in relation to our own trust as to why a discount might be there. You know, there’s also the sort of top-down basis that investors think about the different assets of the different investment trusts.

Mark Boggett (38:33)

So if an investment trust is just purely invested into public companies that are marked to market every day, the discounts tend to be smaller on those. And it tends to be a reflection of their view of the strategy and where it’s going, their view on the capability of the management, and even the of governance capabilities around that particular manager. So this sort of signaling there about discontent around a particular asset.

Mark Boggett (39:00)

As you then move through the different types of companies, ours is focused on private companies. So there’s then a view on the sort of private companies. these private companies only get valued on a quarterly basis. They’re not marked to market. And then investors love to sort of really challenge how you are valuing those and really understand that. as you go from sort of

Mark Boggett (39:28)

trusts that invested in exclusively into public companies to those that are exclusively in private companies, the size of the discount tends to increase. So if the private companies, if the funds that are focused on public companies are all set on a 10 % discount, the argument is that, of course, the trust that are invested in private companies should be 10 % plus something else. And really, this is the way that the market’s been working for the last few years.

Mark Boggett (39:56)

which I think is great for investors because it means that you’re getting into companies at a discount to their underlying net asset value. But one of the things that I think that the market doesn’t do a good enough job of is it’s all very well having discounts and you need to try and understand why that discount exists. But you also have to take that into account with the NAV growth. Which companies are growing NAV?

Mark Boggett (40:23)

repeatedly and progressively and reliably. And that then needs to be taken into account as to whether a particular company is well priced or not. And again, I would sort of use an example SSIT. We announced a very significant increase in the value of ISI.

Mark Boggett (40:49)

where it equated to more than 50 pence, in fact I think it was 75 pence per share, NAV increase. And the share price didn’t move as a consequence of that announcement. We’ve just made an announcement this week about Zona and how much that adds to the NAV per share, which I think is 25 pence. I should have these committed to mind, but apologies if I’m a little out there.

Mark Boggett (41:18)

And the share price didn’t really move on that or it didn’t change to the value of the NAV. So, yeah, these discounts are complicated. And if I knew the actual answer to your question, we wouldn’t have a discount. The big issue from our perspective is that there are sort of unwritten rules in the investment trust market. The biggest and most painful one is that you can’t raise money when the trust is at a discount. Now, we have

Mark Boggett (41:46)

That’s been a real challenge to us as an active investor that has a portfolio of companies that require funding. the last few years have, because we’ve been sat on a discount, we’ve not been able to raise fresh capital. So this is part of the reason why we’ve not continued to put more money into ISI as an example. We went into a period of time earlier this year when we were at a premium and we used that opportunity

Mark Boggett (42:14)

to raise 140 million C-share issue, which we’re now very actively investing into the market. So we as a manager have to be very nimble and jump through windows of opportunity as they appear, which isn’t really very effective from our perspective as a manager. There’s consistent opportunity in the market, but inconsistent access to capital is a negative of this sector.

Richard Berry (42:39)

a liquidity discount as well. Because obviously if you’re investing in private companies, do have to wait until, when do you exit? When do you…

Mark Boggett (42:47)

As an investment trust, you don’t need for us to exit those companies to see the value. We mark those companies and revalue them every quarter. the value each quarter is really sort of reflective of how the business is progressing commercially. so as these companies win

Mark Boggett (43:09)

big contracts and increased revenues and increased profitability. All of that then gets reflected in the fair value of that company and the fair value in aggregate makes up our NAV. know, quarter on quarter, investors are able to get the benefit of these companies as they’re growing. So we don’t need to exit them. This is one of the reasons why we chose the investment trust structure for our growth space fund. Because we believe that what’s happening at the moment

Mark Boggett (43:39)

is the creation of a digital infrastructure in the sky. It’s a bit like a new internet. We think that the companies that we’re investing into are the Googles, the Facebooks, the Amazons of this generation. And when would have been the right time to have sold one of those holdings? And the answer is never. And this is the reason why we chose an investment trust structure so that we could hold onto the companies that we think are the cornerstone companies for this next generation of space.

Mark Boggett (44:07)

and hold onto them for 10, 20, 30 years. So yeah, so that is our sort of approach to why we’ve chosen Investment Trust.

Richard Berry (44:16)

Do think we’ll ever colonise Mars and the moon?

Mark Boggett (44:19)

I would like to think that we will do, but I don’t see this happening, anytime soon. That in the purview of investor interest. I think the Mars element is great to to sort of set the imagination going and drive a sort of future. But it’s the space companies that are providing services to Earth that are really paying the bills.

Richard Berry (44:47)

So Mars is not an investable proposition at the moment.

Mark Boggett (44:51)

No, I think over time and, just to provide a bit more color there, and again, using SpaceX is something that everybody’s aware of and knows and understands. So you’ve got, you’ve got Elon that’s really focused now on building out infrastructure for data centers in space. And what that is, the first iteration of that are satellites and an interlinked satellite constellation that would effectively sit on top of

Mark Boggett (45:20)

the Starlink constellation. So rather than providing internet communication, it provides compute and storage. Now that all makes sense. They’re already the largest manufacturer of satellites in the world. They’ve now already turned their attention to changing from Starlink satellites to data center satellites. So that just seems like an evolutionary next step. So that is happening and underway and that’s going to start sort of becoming real over the course of the next three years or so.

Mark Boggett (45:49)

But that’s really only sort phase number one. Phase number two is really where you’ve actually got things that look like data centers and actually putting them on the moon would be a really good place to do that. They could be free floating, but actually doing these type of things on the moon kind of makes sense. And we need to use that kind of activity to cut our teeth on something that’s closer to home so that we can learn how to do that and then expand on that when we’re going further afield.

Richard Berry (46:18)

So you think it’s realistic that we’ll see data centers on the Moon?

Mark Boggett (46:21)

Yeah, I really do. But you know, it’s not something that’s going to happen in three to five years. But can it happen in five to ten? Probably towards the back end of the ten. But yeah, I think it’s a racing certainty.

Richard Berry (46:34)

Okay. Let’s talk a little bit about your personal investing as we finish up. So obviously space been a big theme within your professional career, but let’s talk about your best and worst personal investments.

Mark Boggett (46:52)

Well, I’m sure it won’t surprise you to recognize that most of my investments are tied up in the space market. When you have a private investment fund, all of the investors insist that the management team invest heavily into that vehicle. So for most of my career, my available wealth has been in my own funds.

Richard Berry (47:20)

back yourself.

Mark Boggett (47:20)

which

Mark Boggett (47:21)

I’m very pleased about because you know everything is performed very well. I don’t have a portfolio of other companies. I’m all in on space and that’s not changing anytime soon.

Richard Berry (47:38)

What about any dogs? Any horrific investments you’ve made that you wish you haven’t?

Mark Boggett (47:44)

Well, bringing this back to the funds and the funds that we manage, let me sort of put this into perspective. So over the last 10 years, we’ve invested into 47 space companies. We’ve had 10 unicorns, the best of which $25 billion, second best $12 billion, and many of them are sort of three and $4 billion.

Mark Boggett (48:09)

We’ve had six IPOs, we’ve had two trade sales, and we’ve had three failures. So failure is something that you would expect that we would have an awful lot more of. I would expect that we have an awful lot more of. And hopefully it sort of demonstrates our sort of capability around diligence and selection, discipline, and all of those things. So where’s it gone wrong? So of the three failures that we’ve had, the…

Mark Boggett (48:37)

Capability of the management team has really been at the center of why something’s gone wrong. And what we typically look to do is be a supportive investor. So where management are clearly not delivering against the potential of the opportunity, one of the first things that we do is sort of supplement the senior people around the founders to try and bring additional capability.

Mark Boggett (49:04)

that doesn’t work, the next step is changing out the founders for professional CEOs, which is a very hard thing to do. It’s like open heart surgery. You know, when you’ve got to that point, it’s a real challenge and involves us rolling up our sleeves and doing an awful lot of work to sort of make that work. this is what we typically do to sort of help companies that are, you know, not going in the right direction.

Mark Boggett (49:33)

And sometimes it works, sometimes it doesn’t. What we get to the point is where we say, look, we’ve done everything that we can reasonably do to help this company and it’s still not working. So it’s very, very rarely the technology that doesn’t work. Very, very rarely. It’s the approach to the market, the management capability around execution and the ability of other investors to continue to put money into those businesses to support that management team.

Mark Boggett (50:01)

So we get to a point where we just say, look, we’re throwing the towel in. We’re going to give up on this company. So what we would often do is actually sell our shares back to management and just say, we’re out, good luck. We’re onto the next thing because you can spend more time than is appropriate on your dogs while sort of just leaving your best companies and using all your time in that way. And we have to be really disciplined around that.

Mark Boggett (50:30)

and it’s a really hard balance. Yeah, that’s right. That’s right. And again, it goes back to the point of why we do run Owens and why the portfolio becomes very concentrated. And a lot of people have got a problem with that. but again, this is not something that we’re going to be changing anytime soon because, you know, we have conviction in those businesses. We sit on the boards of most of the businesses that that we’re that we’re invested into.

Mark Boggett (50:57)

And that gives us a insight into their business that really is a real enabler for that conviction. So this is how we sleep at night with these large positions that we’ve got in a sort of concentrated portfolio.

Richard Berry (51:11)

What do you think is going to be the biggest investment theme next year as we come into 2027?

Mark Boggett (51:17)

So I think it’s got to be AI centric. know, AI and where we are today is like the invention of fire, the invention of the television. You know, this is like so big that it’s changing absolutely everything. And in fact, space is very much like AI. AI is not a sector. It’s a facilitating capability that’s going to change everything. Space isn’t a sector. It’s a facilitating capability that is going to change everything. So the two…

Mark Boggett (51:47)

are intertwined. But if you think about the things that much of our portfolio is focused on, these are satellite constellations that are using sensors from space to collect large amounts of data about Earth in a myriad of different ways. And we then apply AI to that data set to get insights and understandings and fuse those data sets to provide different insights and understandings. So that is accelerating at a pace which is just quite incredible.

Mark Boggett (52:17)

And that is really going to be the main feature of next year. And then that extends to the point that we were talking about with how space is now becoming infrastructure for the AI stack. The most successful AI companies are going to be limited by their access to energy and the cost that they’re paying for that energy. So finding new ways of accessing that energy is an imperative. And space is now

Mark Boggett (52:46)

becoming viable and this is just because of the cost of what it takes to send a kilo into space. know the SpaceX again is the great example here. The Falcon 9 reduced the cost of sending a kilo into space from 80,000 dollars to a thousand dollars. The Starship is ten times bigger than Falcon 9.

Mark Boggett (53:12)

Pricing’s not been publicly made available, but the market believes it can be up to 10 times cheaper. So this has really removed the barriers for doing mega infrastructure in the space environment. The first things that we’re doing are the cell towers and the data centers. But this will quickly lead onto things like energy from space, where we’re bringing back energy back to earth in a reliable and clean way.

Mark Boggett (53:38)

that is going to help end our reliance on oil and hopefully all of the wars that are still being fought on the back of the black stuff that we dig out of the ground.

Richard Berry (53:47)

On the AI theme, what do you say to the naysayers, the people that think all the AI stocks are overvalued and taking up too much of the market?

Mark Boggett (53:59)

Yeah, it’s hard to really, I mean, there is the bull and the bear case here and both of them are right. But this is, to go back to my analogy that this is like, you know, the invention of electricity. This is game changing in every single industry, in everybody’s lives. finding ways for your investments to be exposed to that game changing

Mark Boggett (54:29)

companies is really very important. And actually, you look at the big indices, particularly in America, it’s really the mega scale tech companies that are still moving ahead. If you look at all of the other companies, they’re actually not performing well. This market is really being driven by these larger companies that are heavily investing in this area.

Mark Boggett (54:58)

And now folks are getting concerned about the cost of that investment and in an interest rate rising environment, the amount of money that’s being poured into these data centers and everything that goes with that. there’s definitely sort of cases to why valuations have got overblown, but the market opportunity is measured in numbers that are inconceivable. Hundreds of billions of dollars.

Mark Boggett (55:27)

of new revenue and new opportunity. And how do you value that? How do you value the companies that are in a position to seize that? yeah, we’re in a really interesting point in time. We’ve got an incredible technology driven innovation that is going to change every business and everybody’s lives. But we’re in a market where the bond market’s in a crazy place. We’ve got inflation.

Mark Boggett (55:55)

that’s moving in the wrong direction. And we’ve got sort of political turmoil as well. you know, there’s some real challenges for investors to work out where they stand on that divide regarding, should we be investing more in AI or should we be taking profits now on those that we’ve already made?

Richard Berry (56:12)

Let’s finish on a book recommendation. We ask everybody, what’s a book you’d recommend to investors?

Mark Boggett (56:20)

So, well, I’ll start off with a space one, which is my favorite. It’s been out for a few years now, but in fact, I’m currently listening to it for the second time. And it’s interesting to see how things have changed in a few short years since it’s been out. But that’s the Future of Geography by Tim Marshall. If you’re interested in any of the things that I’ve been talking about, this takes it to a completely different level. But if we’re looking at just more general books,

Mark Boggett (56:49)

on finance. The psychology of money is one that I’d recommend by Morgan Hussle. And that’s very much sort of aligned with what I’m interested in. It’s about patient capital and the need to be patient, but also the impacts of compounding. And then another one that is a favorite of mine is the most important thing by Howard Morley. And that is really about the industrial cycle.

Mark Boggett (57:18)

and how to play at cycles for investment. know, getting in at the right time on a cycle is really how to go about playing these markets. So those are the two that I would recommend.

Richard Berry (57:32)

a few for the reading lists. Mark, thank you very much for coming in and talking to us. It was really fascinating to hear more about space. We’re clearly in a bull market for it. There’s going to be lots of exciting things. Lots of exciting things to lots of exciting things going to

Mark Boggett (57:47)

I think we’re in a boom market. Boom. Yeah. yeah. Well,

Richard Berry (57:52)

associated with bust.

Mark Boggett (57:54)

I think that the point is that there are so many drivers that are underpinning this, you know, with defense as the number one, that’s the budgets are there and the need is there. And we’re only at the beginning of those budgets turning into purchase orders and procurement. So, you know, we’re pretty confident that that alone

Mark Boggett (58:17)

will underpin the growth in this sector. But really it’s really the commercial play that’s really going to deliver the mega returns.

Richard Berry (58:25)

And, and Sarah, where can people find out more about it if they want to get a

Mark Boggett (58:28)

So

Mark Boggett (58:29)

easy on our website, seraphim.vc and we’ve got all sorts of information there. Our role for the last decade has been trying to educate investors. there’s plenty of stuff on there. We’ve got newsletters you can sign up for and it’s great to be on podcasts like this.

Richard Berry (58:46)

Well Mark, thank very much. It’s been a pleasure.

Mark Boggett (58:48)

Thank you.