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Rolls-Royce (RR) Shares Fell 7.23% in Three Days – Here’s Why

Simon Mugo trader
Updated 25 Sep 2023

The Rolls-Royce Holdings PLC (LON: RR) share price has fallen 7.23% from its Thursday highs after the company’s new CEO, Tufan Erginbilgic, told workers that the aerospace and engineering firm was burning and that it had to make drastic changes to survive.


YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.


Tufan noted his discussions with investors, and the thorough analysis of the company’s business activities had revealed that it had a history of destroying value whenever it acquired another company instead of using the new investment to create more value for shareholders and other stakeholders.

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YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY

He sounded the alarm bell and scared many investors about the company’s future. Rolls-Royce generates about 40% of its revenues from the civil aviation division, whose recovery has lagged despite the broad recovery witnessed in the aviation industry.

A crucial factor behind Rolls-Royce’s underperformance is that it makes engines for widebody aeroplanes that are most used for international travel, which is yet to recover fully to the pre-COVID levels after many countries instituted restrictions on travellers entering their soil. 

Tufan told employees that the company, which also manufactures engines for submarines, ships and power generation, needed drastic changes to become competitive. 

Many analysts agreed with the new CEO’s views singling out General Electric, its American competitor that also makes engines for widebody planes, which has always been more profitable than Rolls-Royce in the civil aviation segment. 

However, some analysts were sceptical about how much change the new CEO could implement given that the previous CEO, Warren East, had already initiated significant changes at the firm, including asset sales and the slashing of 9,000 jobs. 

Rolls-Royce shares have risen 31.91% over the past three months as investors reacted positively to the reopening of China to foreign travellers and robust air travel demand recovery. Some analysts have blamed the new CEO’s worried tone for the recent drop in RR shares. 

The alarm sounded by Tufan Erginbilgic has left some investors asking what the new CEO might have uncovered that may not be in the public domain; hence, his alarmed tone. Investors will be watching closely to see what the new CEO does next. 

*This is not investment advice. 

Rolls-Royce (LON: RR) share price.

The Rolls-Royce share price has fallen 7.23% from Thursday’s high of 114.79p to its current price of 107.05p.


YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.


Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading