by Virgo Orbit
It’s been a tough first quarter of 2023 for Virgin Orbit, Sir Richard Branson’s flagship US-based satellite launch company. First, the company had a disastrous launch attempt in the UK in January; The launch failed after a problem with the rocket’s second stage engine. The already precarious financial situation of the company became critical in the course of this failure. As Ars’ Eric Berger reported at the time, several financial analysts were predicting that the company would run out of cash sometime in March.
These analysts turned out to be quite prescient. BBC News reports that the ailing company will cease operations on Thursday and furlough almost all of its employees, although the company has not officially confirmed the furloughs to BBC News. In a statement, the company said simply, “Virgin Orbit is initiating a company-wide pause in operations effective March 16, 2023 and expects to provide an update on continued operations in the coming weeks.” Shares fell in extended trading in response to the news 18.8 percent to 82 cents (72 pence).
According to our previous coverage, Virgin Orbit began as an idea of Branson’s in 2011 as a spin-off of his space company Virgin Galactic with the aim of taking full advantage White knight Airplane. Eventually, it was decided that the company, officially formed in 2017, would use its own aircraft, a modified Boeing 747-400 named Cosmic Girl, as a platform from which small rockets could be dropped and launched. It was funded for nearly a decade by the Virgin Group, the multinational that owns and operates Branson’s various businesses, and the Emirates’ state-owned holding company, Mubadala Investment Company.
There have long been questions about the company’s long-term financial sustainability. Independent estimates suggest that Virgin Orbit has spent as much as $1 billion developing and testing its LauncherOne rocket and air launch system. The company successfully launched for the first time in January 2021 and has since performed one mission every six months on average. Virgin Orbit went public in 2021 but only raised $68 million and had to turn to private investment for another $160 million to keep it running.
Most recently, Branson has supported the company’s finances. He invested $25 million in November 2022 and another $20 million in December 2022 secured Note that Branson has priority as the creditor for the company’s assets, including “all aircraft, aircraft engines (including aircraft spare parts) and related assets.”
The January 9 launch failure followed four consecutive successes. The first stage engine shutdown appeared to be nominal while the second stage fired to complete the 8.5 minute burn into low earth orbit. Thirty-five minutes after the rocket fired, and long after it should have reached orbit, the company tweeted that a problem had arisen. “We seem to have an anomaly that prevented us from reaching orbit. We evaluate the information.” The company announced this via Twitter.
Virgo Orbit
Virgin Orbit did not provide further information on the cause of the accident, which led to the loss of nine small satellites on board. But according to BBC News, “Virgin Orbit later said the mission failed because a rocket fuel filter came loose, causing one of the engines to overheat.”
Officials tried to put a bold face on the outcome of the mission and the future of Virgin Orbit. But in February, Virgin Orbit officially told investors it had raised an additional $10 million from Branson-owned Virgin Investments Limited, further adding to concerns about the company’s solvency. As Ars reported:
This week’s financial disclosure is worrying for a number of reasons. The figure of $10 million is very low and provides only a few weeks of funding for the company given its high overheads and high labor costs. In addition, the note has an interest rate of 12 percent, which is double the interest rate of the November and December notes, which had an interest rate of 6 percent. Finally, the new filing includes a separate security agreement that explicitly converts November Branson’s unsecured note into a secured obligation.
Based on the cash available to Virgin Orbit last October, Branson’s investments are likely to extend the company’s financial runway until at least April 2023. As such, it is possible that the company may make some kind of… von announces “review” of its strategic options to remain financially solvent.
Stay tuned for more details as they become available.
