Hypersonic Hopeful: Reaction Engines' Valuation Takes a Nosedive
London-based fund manager Artemis is set to slash the value of its stake in Reaction Engines, a trailblazing aerospace firm aiming to revolutionise hypersonic travel.
Sky News has learned that Artemis, holding a 2.3% stake in the company, intends to write down the value of its investment by a staggering 75%. This significant move is expected to be announced by the Artemis Alpha Trust, which manages the stake, as early as Friday.
This news comes on the heels of a similar announcement from Schroders Capital Global Innovation Trust on Thursday, revealing they have reduced their holding in Reaction Engines from £10.6 million to a mere £1.4 million. This revaluation effectively puts the company's entire worth at just £34 million, a stark contrast to its previous valuation.
Schroders' statement attributed the value reduction to the company's slower-than-expected revenue growth despite efforts to commercialise its heat exchanger technology and secure contracts. They highlighted the need for further investment and time to reach profitability. Reaction Engines has, in turn, sought the guidance of advisors to attract additional funds from both new and existing investors.
While other fund managers, including Baillie Gifford, are keeping a close eye on Reaction Engines' valuation, one asset management source expressed continued belief in the company's technology, suggesting a substantial fundraising success could lead to an upward revision of the company's worth.
Sky News reported last month that Reaction Engines had engaged the services of Silverpeak, an advisory firm, to oversee a new fundraising round. Founded in 1989 and chaired by former Defence Minister Philip Dunne, the Oxfordshire-based company specialises in developing cutting-edge propulsion systems. Their flagship project is a novel engine designed to propel aircraft to Mach 25 speeds beyond Earth's atmosphere.
Despite the recent valuation woes, Reaction Engines has seen its commercial revenues increase by over 400% in the past year and boasts a promising pipeline of contracts and research and development opportunities. One industry source highlighted the potential for substantial short-term and long-term revenues stemming from the application of Reaction Engines' cooling technology across existing and emerging military aircraft. They also noted interest in the technology for use in hydrogen and battery-powered zero-emission commercial flight technologies.
In January 2022, Reaction Engines secured an additional £40 million in equity funding, bringing the total investment received from investors to approximately £150 million. The company's ability to attract interest and funding from prominent aerospace giants underscores the excitement it has generated among both strategic and financial stakeholders.
Despite the recent valuation adjustments, Reaction Engines' long-term potential remains undeniable. With its groundbreaking technology and robust pipeline of opportunities, the company continues to hold a unique position in the aerospace industry. The next few months will be crucial for Reaction Engines as they navigate the fundraising landscape and strive to regain investor confidence.
Artemis and Reaction Engines declined to comment on the matter.
