Veem yesterday announced Sharrow had formally accepted the performance of the Sharrow by Veem inboard propellers on Veem's test boat. The move opens up the ability for Veem to now start building and selling Sharrow by Veem propellers for customers for inboard applications. They are off to good start with 280 customers already having put down an admittedly nominal (US$100) deposit on the revolutionary design. All of which prompted me to sell my remaining holding here and IRL...wait, what the...?

I might look back on the sale as a failed attempt to play 4D chess, but I need to put my thinking down to remind myself there was some thinking even if it was wrong. Basically, when I sold a portion of my holdings a few weeks ago I did so on two grounds: valuation and on the complexity that was becoming apparent in adapting Sharrow's design to an inboard application. Both of those factors were exacerbated yesterday, with the SP popping and the complexity confirmed.

When Veem originally announced the partnership in October they talked about testing taking place on their boat "in coming weeks", with acceptance implied soon after, sales in early 2024 and the full range offered by the end of 2024. That was probably always optimistic, but I think the timeframes now look wildly heroic. Management more or less conceded the engineering is a lot more complex for inboard motors, with solutions needing to be a lot more bespoke than the generic "one size fits most" approach Sharrow can take with outboard motors. Boat size, weight, propeller shaft angles, vibration and lots of factors I can't even imagine are much bigger issues for the props Veem will be producing, compared to Sharrow.

I'd still back them in to make it a success, but there's going to be a steep learning curve during the first couple of years, while Veem build up a catalogue of what attributes work in particular scenarios. I imagine there is a high likelihood of significant and expensive reworking of props. Further to that, the price of making it a success will be further significant investment required with a new manufacturing site being mooted for Europe or the United States.

My best guess is the next couple of years are a good opportunity to sit on the sidelines, wish them well and hope to get back in later with a better risk/reward tradeoff. The biggest risk I see to this thesis is Defense. I previously mooted that the characteristics of the Sharrow design (particularly quietness) would on face value have great appeal to world navies. Management called this out yesterday with upcoming underwater decibel testing to take place in coming months. If that testing confirms the more subjective and less relevant on deck experience, than it's hard to imagine how you send out a navy not equipped with Sharrow props, which Veem are in the box seat to build. In that scenario Defense are much more likely to fund development. Something to watch.