Reaction Engines, a rocket propulsion hothouse backed by Rolls-Royce, Boeing and BAE System is looking at a listing in London with a valuation of up to £1bn.
Founded in 1989 by three former Rolls-Royce engineers, the Harwell, Oxford, based company intends to raise money initially through a private funding round before a potential IPO in 2024, Sky News reported.
Reaction has already received funding from the UK Space Agency, the European Space Agency and America's DARPA research agency but is looking for an additional £35mln in new funds to help develop its SABRE rocket engine, a propulsion system based around ammonia and hydrogen.
Rolls-Royce has been actively flagging its moves into new technologies and used this year's Farnborough Airshow to showcase its planes for hydrogen-fuelled flight.
At the show, it said: “Rolls-Royce is planning a comprehensive series of rig and engine tests to prove the fuel can safely and efficiently deliver power for small-mid size aircraft from the mid-2030s onwards,” it said.
Tests will initially be run on its existing Pearl 15 jet engines, which currently power Bombardier 16-seater business jets.
Rolls has also been breaking speed records with an electric-powered plane, though this is a single-seater and at the very early development stage.
Shares in Rolls rose 0.4% to 80.6p.