Ritika Janiya
Rolls-Royce stands among those famous for some of the best engines in the world, and yet one of the biggest investments it made is not doing that great. Reaction Engines works to build a super-fast engine to revolutionize travel. Recent news shows it has dropped drastically in value. Here’s what is
happening in simple terms.
What’s On?
Reaction Engines are an engine maker with cool technology that’s supposed to fly just incredibly fast. Can you imagine flying Britain to Australia in just four hours? That is the speed they speak about. As a matter of fact, they are nicknaming this as the “new Concorde”, inasmuch as they say it is as revolutionary as the Concorde jet in its time.
But in recent days, two major UK fund managers Schroders and Artemis have drastically cut the valuation of their Reaction Engines investments.
Massive Valuation Fall
Schroders, one of the largest investment houses in the UK, previously held a 4.1% stake in Reaction Engines. They have chopped 87% off the value of their holding. This takes its stake, valued at £10.6 million in December, down to £1.4 million.
Another fund manager, Artemis, has similarly written down the value of its holding by some 75%. It used to have a 2.3% stake in Reaction Engines, but its share is worth a lot less now.
Why the Drop?
But the main reason for this decline in value is because Reaction Engines is taking longer and costing more than expected to get its technology off the ground. That’s for that special engine which can travel up to 19,000 miles an hour-incredibly fast-and not overheat doing it. So, they have devised some special cooling technology to avoid overheating.
But things haven’t been quite as smooth as they had hoped. While there have been a few recent successes, such as some major contract wins, the company is not generating the revenue for which they hoped. As a result, they will need to spend more time and investment than planned before reaching profitability.
Funding Challenges
Reaction Engines isn’t just backed by Rolls-Royce but also by BAE Systems, even down to the UK government. Still, Reaction Engines needs more money to survive. They hired advisers in a move to help their company raise funds from new and old investors. Even Rolls-Royce does not exclude themselves in raising awareness for their fundraising activities.
How It Works: Testing the Technology
It has already tested some of Reaction Engines’ technology on naval ships, for waste heat recovery and exhaust cooling. While promising, that hasn’t been enough to boost the overall financial health of the company.
A Change in Management
Schroders picked up its stake in Reaction Engines when it acquired the Woodford Patient Capital Trust. The trust was an early investor in Reaction Engines. The revaluations reflect that the company’s progress-and its financial prospects-are not quite as bright as had been hoped.
What to Watch
Despite all these complications, Reaction Engines is still working hard on their revolutionary technology. With the company feeling hopeful, after more investment and time, they will get over these complications and see their high-speed engine turn into reality.
In short, Reaction Engines, with their ambitious project of super-fast travel, is having it tough in the meantime. Major investors have severely cut the value of their stakes in the company, which failed to reach its targets in financial and development aspects. They need more time and money to get this highly patented technology running. With continued support and a bit of luck, they hope to turn things around and achieve their dream of revolutionizing travel.
