Virgin Hyperloop – Unreality bubble

The clue is in the name.

  • I have been sceptical on many companies and projects (and been proven wrong in many cases) but the technology and the company I am most sceptical about is Virgin Hyperloop which appears to need to get rid of the laws of physics in order to get off the ground.
  • Reality is starting to really bite at this company which has reportedly just laid off half of its staff and will now pivot to freight rather than passengers (see here)
  • I think that this heralds the rapidly approaching end of this experiment with unreality.
  • Virgin Hyperloop is a company that is trying to develop very high speed (670mph) train transportation that will compete against air transport.
  • The problem is that on the ground, air resistance means that these sorts of speeds are impossible which is why the Hyperloop train or capsule has to travel in a near-vacuum.
  • This is where the laws of physics really start to cause difficulty.
    • First, safety: vacuums take a lot of effort to maintain and are catastrophic when they fail (see here (time stamp 2.37)).
    • Virgin Hyperloop is proposing to create 500km (or longer) vacuum chambers where any small puncture could cause a shockwave to travel down the tube at the speed of sound.
    • This would most likely kill anyone travelling inside the tube.
    • Consequently, the entire length of the route of the Hyperloop would have to be securely guarded to prevent any such breaches from occurring.
    • This pivot towards freight may be a tacit admission of the problems that a 500km vacuum chamber presents as destroyed cargo is easier for a company to weather than dead customers.
    • Second, length: Metal has an inconvenient habit of expanding when it gets hot and contracting when it gets cold.
    • This means that in a place like Arizona, California or the UAE (where many proposals have been made) a 500km long metal tube would increase and then decrease in length by around 300m over the course of a sunny day.
    • This causes all sorts of problems in terms of how to position the platforms and other infrastructure that surrounds the Hyperloop track.
    • This problem is further compounded by the fact that the top of the track which will be in the sun will expand by more than the bottom which will be in the shade.
    • This could cause all manner of engineering problems as well as structural integrity issues.
    • One fix for this would be to put pliable vacuum seals in between each section of the track to deal with the heat properties of the metal but these will require a huge amount of maintenance and testing to ensure that they are safe and intact at all times.
    • All of the test tracks constructed to date have each section welded together with no seals meaning that this issue has yet to be tested by Virgin Hyperloop.
  • These problems are just the tip of the iceberg but in my opinion, are more than enough to sink this idea long before it reaches any form of realistic testing.
  • To compound the irrationality, Virgin Hyperloop chose West Virginia for its high-tech certification centre back in October 2000.
  • This means that the research and development to get the Hyperloop up to its full speed will be done in this state.
  • This is proposed to be carried out via the construction of a 6-mile test track and, presumably longer ones, as the technology matures.
  • In my opinion, West Virginia is probably the worst state that Virgin Hyperloop could have chosen for a test centre highlighting that this deal was all about money and had nothing to do with the project itself.
  • Objects on roads or rails travelling at 670mph do not go round corners very easily meaning that the test track would need to be almost completely straight to test this properly.
  • West Virginia is full of hills meaning that either the test track will have a series of tight turns rendering it useless for high-speed or a hugely expensive tunnelling operation will be needed to make the track straight enough.
  • Virgin Hyperloop has stated that it chose this location over 17 others which, given its geographic unsuitability, means to me that West Virginia offered Virgin Hyperloop the best option for delaying financial catastrophe for as long as possible.
  • This latest twist combined with persistent executive turnover tells me that the company is in dire financial trouble and has suffered from persistent infighting.
  • A move towards freight does not alleviate the physical and engineering problems that a 500km vacuum chamber presents, but it does alleviate some of the safety issues with no people being inside the chamber.
  • I suspect that this marks an acceleration of the problems and the turmoil at Virgin Hyperloop that can only end in its closure.
  • Anyone who is approached for the inevitable fundraising that is sure to follow this year or next should politely decline to throw good money after bad.

RICHARD WINDSOR

Richard is founder, owner of research company, Radio Free Mobile. He has 16 years of experience working in sell side equity research. During his 11 year tenure at Nomura Securities, he focused on the equity coverage of the Global Technology sector.