Investors in Reaction Engines Experience Significant Writedowns

Prominent shareholders in a British firm advancing the development of an innovative engine for a next-generation space vehicle, often referred to as the new Concorde, have notably decreased the assessed value of their investments.

Artemis has reduced the valuation of its 2.3 per cent share in Reaction Engines by a staggering 75 per cent, following a previous 25 per cent reduction in July. Artemis Alpha Trust, which manages the stake for the London-based investment firm, now estimates its value at £1.2 million, a stark contrast to £6.4 million in April.

“Despite the meaningful strides the company has made in commercializing its groundbreaking technology, the rate of revenue growth has lagged behind expectations,” the fund reported to its investors. “The firm is currently undertaking an internally driven fundraising initiative that is anticipated to occur at a valuation lower than the previous one.”

This week, Schroders Capital Global Innovation Trust also adjusted its investment value in Reaction Engines down from £10.6 million at the end of last year to £1.4 million by the close of June. These reduced valuations indicate that Reaction, with investors including BAE Systems and Rolls-Royce Holdings, is presently valued at approximately £34 million.

The Schroders trust highlighted that, even with the company’s efforts to commercialize its heat exchanger technology and new contract acquisitions, revenue growth has not met projections.

Schroders inherited its investment from a stake initially made in 2018 by Neil Woodford, who was involved in one of Britain’s notable investment scandals. The trust took over management of the Woodford Patient Capital Trust, which was among the early supporters of Reaction Engines.

Founded in 1989, Reaction Engines is chaired by Philip Dunne, a former Conservative defense minister from 2012 to 2016. The company has been under the leadership of Mark Thomas since 2015, following a 25-year tenure at Rolls-Royce, the aerospace engine manufacturer.

Reaction Engines has been working on a hybrid jet and rocket engine known as Sabre, aiming to enable hypersonic space travel at speeds reaching 19,000 mph. A key component of this development is the company’s innovative pre-cooling technology, which protects engines from overheating.

In 2020, Rolls-Royce reportedly invested £20 million in Reaction Engines as part of a collaboration with Virgin Galactic to create a supersonic business jet that could reduce travel time from London to New York to just 90 minutes. Last year, Reaction Engines raised an additional £40 million in equity, bringing its total funding to £150 million.

Reaction Engines was invited to respond to these developments, though Artemis chose not to comment.