Report: Cash-strapped Virgin Orbit Furloughs Almost All Staff, Pauses Operations for a Week
WASHINGTON — During a panel discussion at Satellite 2023 Conference on Wednesday afternoon, United Launch Alliance (ULA) CEO Tory Bruno predicted there would be a shake out among small launch providers over the next 24 months that could leave only one or two companies standing. CNBC reports that process might have already begun earlier in the day with Richard Branson’s struggling launch provider.
Virgin Orbit is furloughing nearly all its employees and pausing operations for a week as it looks for a funding lifeline, people familiar with the matter told CNBC.
Company executives briefed staff on the situation in an all-hands meeting at 5 p.m. ET on Wednesday, according to people who were in the meeting. The furlough is unpaid, though employees can cash in PTO, with only a small team continuing to work. Virgin Orbit is also moving up payroll by a week to Friday.
In the all-hands, company leaders told employees that they aimed to provide an update on the furlough and funding situation by next Wednesday or Thursday, according to the people, who asked to remain anonymous to discuss internal matters.
Virgin Orbit’s (NAS: VORB) stock plunged to $0.76 in after-hours trading. Shares had previously closed at $1.06.
Virgin Orbit has struggled financially amid an inability to ramp up its launch cadence. LauncherOne has flown only six times since its debut in May 2020. The rocket failed on its maiden flight, which had no satellites on board. It then succeeded on four subsequent flights in 2021-22.
Virgin Orbit’s most recent launch from Spaceport Cornwall in England failed in early January, destroying nine satellites and leaving LauncherOne grounded. The company said the booster failed after a fuel filter broke loose.
Richard Branson has put $60 million into Virgin Orbit since Nov. 4, 2022. The most recent investment of $5 million came on March 3.
Branson’s company, Virgin Investments Ltd. (VIL), made the $5 million investment in the form of a “senior secured convertible note…which is convertible into shares of the Company’s common stock or other Qualified Securities.” The note has an interest rate of 12% — 16% in the event of a default — and a maturity date of Nov. 4, 2024.
Investments in Virgin Orbit
by Virgin Investments Ltd.
| Date | Amount (Millions) | Interest Rate | Interest Rate (Default) | Maturity Date |
|---|---|---|---|---|
| 11/4/22 | $25 | 6% | 10% | 11/4/24 |
| 12/19/22 | $20 | 6% | 10% | 11/4/24 |
| 1/30/23 | $10 | 12% | 16% | 11/4/24 |
| 3/3/23 | $5 | 12% | 16% | 11/4/24 |
In the event of a default, VIL has the right to foreclose on “substantially all of their respective assets, including all aircrafts, aircraft engines (including spare aircraft parts) and related assets, other than certain customary excluded assets and permitted liens described in the Convertible Note.”
The provision applies to all $60 million that VIL has provided to the company since November. Nineteen days after the first cash infusion, Virgin Orbit announced it has abandoned plans to sell additional stock to the public “due to current market conditions.”
Virgin Orbit’s cash reserves had dwindled amid its struggles to increase its launch rate. Virgin Orbit’s cash and cash equivalents dwindled from $194.2 million at the end of 2021 to $71.2 million at the end of the third quarter on Sept. 30.
VIL’s $25 million investment in November came three days prior to reporting third quarter revenue of $30.9 million and a net loss of $43.6 million. The company’s net loss was $139.5 million, for a monthly average of $15.5 million, for the first nine months of 2022.
Virgin Orbit reportedly spent $1 billion to get to the first launch. In order to raise more money, Virgin Orbit began trading on Nasdaq at the end of 2021 after merging with a special purpose acquisition company (SPAC) named NextGen Acquisition Corp. II.
A SPAC is a “blank check” company that is already publicly traded; the investment vehicle’s only purpose is find a company to take public under its own name. A SPAC typically has two years to complete a merger or to return investors’ money. Investors can ask for their money back if they don’t like an approved merger deal.
Virgin Orbit and NextGen had planned to raise $483 million, with $383 million coming from SPAC investors and $100 million from outsiders. The total amount raised was only $228 million. Only $68 million came from the SPAC, indicating that many SPAC investors likely asked for their money back rather than own shares in in Virgin Orbit.
The Virgin Group and Mubadala Investment Co. invested an additional $60 million to raise the amount provided by outsiders to $160 million. Mubadala is the sovereign wealth fund of the Abu Dhabi government and a co-owner of Virgin Orbit.
Virgin Orbit’s stock debuted at $8.525 on Dec. 30, 2021. It rose to a high of $11.28 on Jan. 11, 2022, but has gradually declined in the 14 months since.
Virgin Orbit went public near the end of a wave of space SPACs that kicked off three years ago by its sister company, Virgin Galactic (NYS: SPCE). Branson’s space tourism company began trading on the New York Stock Exchange on Oct. 28, 2019, after merging with a SPAC run by Silicon Valley billionaire Chamath Palihapitiya.
