The Small (Modular Reactor) Short

Nuclear investors see “an industry bubble that is already deflating”

Guess who’s making money from the alleged small modular reactor boom? Or rather, guess, who’s not making a profit? We’ve been calling the SMR schemes “crypto nukes” for a while, because they seemed like the same kind of scam as the crypto currency racket. But, it turns out, the SMR mirage has more in common with the US subprime mortgage scandal.

That debacle, which played out from 2007 to 2010, was immortalized in the excellent 2015 docudrama, The Big Short. It dramatized the true story of financial outsiders who realized that the US housing market was propped up on bad loans doomed to fail. By betting against those loans (the “short” of the title), before the market collapsed, they made themselves significant fortunes.

On August 18, the Financial Times(opens in new tab) ran a headline, “Short sellers reap $2bn profit as modular nuclear reactor stocks tumble.” (The article is behind a paywall, so we’ll paraphrase and quote it instead.)

It revealed how, predicting the “hype cycle” was about to collapse, and the fact that the three SMR companies in question — NuScale Power, Nano Nuclear and Oklo — were “lossmaking and have little or no revenue,” the short sellers pounced, reaping $2.1 billion in profits.

The article, replete with graphs showing plunging loss lines, paints a damning picture of an over-inflated industry with no actual there there. “A total of $30.3bn has been wiped off their collective market value since their peak in October last year amid growing concerns over the lack of immediate revenue and the long build-out timelines for the technology,” the Financial Times reported.

Beyond the three companies shorted, another of the close to 80 small reactor startup projects, X-energy, also “shed $5.8bn in market value since the surge that followed its initial public offering in April,” wrote Ramsey Hodgson, the FT reporter.

Predictably, the nuclear-promoting Breakthrough Institute tried to spin the whole thing as normal, with its nothing-to-see-here claim that the earlier over-inflation and current collapse of stock prices is “very typical of a company that is in this early, pre-consistent revenue phase,” the institute’s Adam Stein reassured the FT. Just birth pains, not a stillbirth, he appeared to insist.

But other financial experts interviewed for the story took a rather less rosy view. Enthusiasm for SMRs is waning now that it has become clear that most of the reactor startup companies have no revenue — and no reactors — to show for their efforts, and no sign of either on the horizon until at least 2030, an optimistic view to put it mildly.

Nano Nuclear has generated zero revenue and “posted a $14mn operating loss in the first quarter of the year,” the FT said. NuScale is facing a class action suit for defrauding investors after its plans collapsed. Oklo has yet to secure a regulatory license.

As we have repeatedly pointed out here at Beyond Nuclear, and as the FT reiterates, “timelines for delivery of the unproven reactors remain uncertain.” Or maybe not so uncertain. They simply won’t arrive at all.

Headline photo by zeevveez/Creative Commons