The first quarter of 2023 has been a tough one for Virgin Orbit, Sir Richard Branson’s flagship US satellite launcher. First, the company had a failed launch attempt in the UK in January; the launch failed due to a problem with the rocket’s second stage engine. After this collapse, the already precarious financial position of the company became critical. As Eric Berger of Ars reported at the time, several financial analysts predicted that the company would run out of money sometime in March.
These analysts proved to be very valuable. BBC news reports that the beleaguered company would suspend operations on Thursday and lay off almost all of its employees, although the company has not officially confirmed these holidays to BBC News. The company statement simply reads: “Virgin Orbit will initiate a company-wide operating pause effective March 16, 2023 and expects an update on further operations in the coming weeks.” Shares fell 18.8% to 82 cents (72 pence) in extended trading in response to the news.
According to our previous reports, the idea for Virgin Orbit originated in 2011 with Branson as an offshoot of his Virgin Galactic space business with the goal of fully exploiting White knight airplane. In the end, it was decided that the company, formally established in 2017, would use its own aircraft – a modified Boeing 747-400, named space girl, as a platform from which he could drop and launch small rockets. For the better part of a decade, it was funded by the Virgin Group, the multinational company that owns and operates various Branson businesses, and the Emirati state-owned holding company, Mubadala Investment Company.
There have long been questions about the company’s long-term financial viability. Virgin Orbit independently estimated that it spent about $1 billion developing and testing its LauncherOne rocket and air launch system. The company had its first successful launch in January 2021 and has since averaged one mission every six months. Virgin Orbit went public in 2021, but this raised just $68 million and was forced to turn to private investment for an additional $160 million to keep the operation going.
More recently, Branson has supported the company’s finances. He invested $25 million in November 2022 and another $20 million in December 2022. secured a note that gives Branson priority as creditor of the company’s assets, including “all aircraft, aircraft engines (including aircraft parts) and related assets.”
A failed launch on January 9 followed four successive successes. The first stage engine shutdown proved to be normal, and the second stage ignited to complete the 8.5-minute low Earth orbit ascent. Thirty-five minutes after the rocket was launched, and well after it was supposed to go into orbit, the company tweeted that there was a problem. “It looks like we have an anomaly that prevented us from reaching orbit. We evaluate the information The company announced this on Twitter..
Virgin Orbit did not provide any further details about the cause of the accident, which resulted in the loss of nine small satellites on board. But according to BBC“Virgin Orbit later said the mission failed because the rocket’s fuel filter had become dislodged, causing one of the engines to overheat.”
Officials were keen to put a bold face on the results of the mission and the future of Virgin Orbit. But in February Virgin Orbit officially notified investors that he had raised an additional $10 million from Branson’s Virgin Investments Limited, further heightening concerns about the company’s financial viability. As Ars said:
Financial disclosures this week are worrisome for several reasons. The amount of $10 million is very small, providing only a few weeks of funding for the company, given its high overheads and large payroll. Moreover, the interest rate on the bill is 12 percent, which is twice as high as the November and December bills, on which the interest rate was 6 percent. Finally, the new application contains a separate security agreement that expressly makes Branson’s unsecured November note a secured obligation.
Judging by the cash that Virgin Orbit had last October, Branson’s investment is likely to prolong the company’s financial takeoff until at least April 2023. “Reconsider” your strategic options as he strives to remain financially solvent.
Stay tuned for more details as soon as they become available.