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Fund manager Artemis slashes value of Reaction Engines stake

29 August 2024, 16:55 | Updated: 29 August 2024, 20:43

Artemis, the London-based fund manager, is slashing the value of its stake in a revolutionary aerospace company which has set its sights on pioneering hypersonic travel.

Sky News has learnt that Artemis, which holds a 2.3% stake in Reaction Engines, intends to write down the value of its holding by approximately 75%.

An announcement is expected to be made by the Artemis Alpha Trust, which manages the stake, as soon as Friday, according to insiders.

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If confirmed, it would echo a statement issued on Thursday afternoon by Schroders Capital Global Innovation Trust that it had decided to cut the value of its holding from £10.6m to £1.4m.

That revalued the entirety of Reaction Engines, whose shareholders also include the FTSE-100 companies BAE Systems and Rolls-Royce Holdings, at just £34m.

"Despite steps to commercialise its heat exchanger technology and recent contract awards, revenue growth at Reaction Engines has been slower than management anticipated, and the company will require further investment and time to become cash positive," the Schroders statement said.

"Reaction Engines has appointed advisers to raise additional funds from new and existing investors."

Other fund managers, including Baillie Gifford, are said to be keeping Reaction Engines' valuation under review.

One asset management source said on Thursday they continued to have conviction about the potential of the company's technology and said a successful and substantial fundraising could encourage upward revisions to Reaction Engines' valuation.

Sky News revealed last month the Oxfordshire-based company had appointed Silverpeak, an advisory firm, to oversee a new fundraising

Founded in 1989, Reaction Engines is chaired by Philip Dunne, a former defence minister.

A specialist in developing advanced propulsion systems, the company is developing a new type of engine aimed at powering aircraft to Mach 25 outside the Earth's atmosphere.

According to recent updates to shareholders, it grew its commercial revenues by more than 400% last year and is understood to have a strong pipeline of contract and R&D; opportunities.

One industry source said the application of Reaction Engines' cooling technology across a range of existing and in-development military aircraft had the potential to unlock significant short-term and long-term revenues for the company.

They added the company had also seen interest in its technology for use in hydrogen and battery powered zero-emission commercial flight technologies.

In January last year, Reaction Engines announced it had raised £40m of additional equity, taking the total sum it had banked from investors to roughly £150m.

Reaction Engines' ability to attract interest and funding from some of the world's biggest aerospace companies underlines the excitement it has galvanised among both strategic and financial investors.

Artemis and Reaction Engines both declined to comment.