The Virgin Orbit crew poses at the opening bell ceremony after a 70-foot model rocket carrying a satellite is installed in front of NASDAQ in Times Square, New York City, USA, January 7, 2022.
Taifun Koskun | Anadolu Agency | Getty Images
a while ago, Virgin Orbit has a tenuous air among US rocket builders, with executives celebrating an IPO in New York.
The scene stayed true to the marketing flashiness that helped Sir Richard Branson He built Virgin’s corporate empire by displaying a model rocket in the middle of Times Square.
The deal, facilitated by a so-called blank check firm, has put Virgin Orbit’s valuation at nearly $4 billion. But at that moment in December 2021, when the public offering fad around special purpose acquisition companies (SPACs) was coming to an end, it foreshadowed the pain to come.
Virgin Orbit is now on the brink of bankruptcy.thursday company ceased operations and laid off nearly all staffThe shares traded at about 20 cents on Friday, giving the company a market value of about $74 million.
When Virgin Orbit completed its SPAC deal, it raised less than half of the expected $500 million. Virgin Orbit’s stock began a steady decline as the market turned against riskier but unprofitable assets like many new space stocks, further limiting its ability to raise significant outside investment. .
As CNBC previously reported, Branson, Virgin Orbit’s biggest stakeholder, was unwilling to provide any more money to the company. Instead, he began hedging against his 75% equity holding through a series of his rounds of debt. That debt now gives the flamboyant British billionaire the first priority of Virgin Orbit’s assets in case of impending bankruptcy.
Virgin Orbit touted a flexible and alternative approach to launching small satellites, but the company was unable to reach the launch rate it needed to generate the revenue it desperately needed.
Virgin Orbit’s technical staff pleaded not guilty to the company’s short lifespan, but was ultimately undone by management’s financial mismanagement. This is a story told all too often in the history of the space industry. Even exciting or revolutionary technology is not necessarily good business.
The company became one of the few US rocket companies to successfully reach orbit with a privately-developed rocket. The company has launched six missions since 2020, four successful and two unsuccessful, and is in flight with a modified 747 jet through an ambitious and technically challenging process called “air launch”. used a system to drop rockets on and launch small satellites into space. .
But Virgin Orbit was digging a nearly billion-dollar hole, could only fly two missions a year, and had mounting labor costs. The company’s management recognizes the deteriorating situation and lack of progress, and last summer considered changes to make the business leaner. did not materialize, leading to Thursday’s decline.
This article gathers insights from CNBC’s discussions with corporate insiders and industry investors over the past few weeks, as well as regulatory disclosures, to explain where things went wrong with Virgin Orbit. These people requested anonymity to discuss internal or competitive issues.
A Virgin Orbit spokesperson declined to comment for this article.
lack of execution
The company’s 747 jet “Cosmic Girl” will launch a LauncherOne rocket into the air for the first time during a drop test in July 2019.
Greg Robinson / Virgin Orbit
Virgin Orbit was spun off from Branson’s space travel company. Virgin Galactic, in 2017 after a team from the latter’s sister company saw the potential in using the aircraft as a platform to launch satellites. An “air-launched” satellite was not a novel idea for Virgin Orbit, but the company aimed to surpass the air-launched Pegasus rocket developed by Orbital Sciences, now owned by Northrop Grumman.
Headquartered in Long Beach, Calif., Virgin Orbit flew most of its missions from the Mojave Aerospace Port. The exception was the latest launch, which took off from the British spaceport Cornwall. Virgin Orbit has worked with other governments to fly from airports around the world and has agreements to provide launches for Japan, Brazil, Australia and Guam.
The flexibility and potential of the touted Virgin Orbit approach has garnered considerable attention from leaders in the US national security community. After meeting with Pentagon officials in 2019, Branson declared Virgin Orbit to be “the only company in the world that can replace it.” [satellites] Within 24 hours” during a military conflict.
At the time, Air Force acquisition leader Will Roper said he was “very excited about the small launch” after meeting with Branson. “I have a lot of money,” he said.
The company had hoped to launch its debut mission as early as 2018, but that goal kept shifting every six months. Ultimately, Virgin Orbit launched his first mission in May 2020, but it failed shortly after the rocket was ejected from the jet. It will successfully orbit for the first time in January 2021.
Given that the company’s quarterly burn rate is close to $50 million, Virgin Orbit was targeting profitability once it exceeded its launch rate (cadence) of 12 missions per year. When it went public, Virgin Orbit CEO Dan Hart told CNBC that the company is aiming to launch seven rockets in 2022 to keep up with the momentum.
At the same time, Virgin Orbit was already in a deep financial hole. Steady losses since inception will result in a total loss of $821 million by the end of 2021. Virgin Orbit aimed to launch seven missions last year, but that number has been steadily declining quarter by quarter, and 2022 is the same as the previous year, as he closed out with two completed lunches.
Some people inside the company who were critical of Virgin Orbit’s execution said: boeinghas its share space-related issues Over the years.
Virgin Orbit CEO Dan Hart has been with Boeing for 34 years and was previously Vice President of Government Space Systems. COO Tony Gingiss joined Virgin Orbit from satellite broadband company OneWeb, where he spent 14 years at Boeing’s satellite division. Chief Strategy Officer Jim Simpson also worked for Boeing’s satellite division for more than eight years before joining Virgin Orbit.
As one person highlighted, the company launched as many rockets in a year with 500 staff as it did with over 750 employees. Others complained that projects and expenditures were siled against each other, resulting in a lack of cross-departmental coordination, leading to schedule breaks.
Two people mentioned the waste of ordering materials. For example, the company buys enough expensive items with a limited shelf life that he builds over a dozen rockets, but he can only build two. That means we have to throw away millions of dollars worth of raw materials.
When Virgin Orbit announced an employee furlough on March 15, the company’s Long Beach plant had about six rockets in various states of production, according to people familiar with the situation.
Multiple Virgin Orbit employees expressed dissatisfaction with how Hart conveyed the company’s position, as the lack of financial lifelines made the situation increasingly hopeless.
On the day operations first paused, people described company management frantically running around while many employees stood and waited to see what was happening. One person emphasized that the turbulent and sudden leave occurred because management tried to keep the company alive for as long as possible. Several employees said Hart held his March 15 all-hands meeting virtually, speaking from his office rather than face-to-face, and declined to take questions after announcing the suspension of operations. expressed disappointment.
That frustration continued after the hiatus, with employees confused by the lack of details about which investors were talking to Virgin Orbit management. Thursday’s update that the deal didn’t go through didn’t come as a surprise to employees who were mostly stuck. Many were already looking for new jobs.
Trading Efforts Collapse
A rocket for the company’s second demonstration mission undergoing final assembly at the company’s factory in Long Beach, California.
Virgin Orbit’s strategic pivot became apparent and necessary shortly after its publication.
Virgin Orbit was aiming to raise $483 million through the SPAC process, but due to a major redemption, it was able to raise less than half of that, taking total revenue to $228 million. The funding it raised came from a handful of stranded SPAC shareholders, as well as private investments from Virgin Group, Emirati’s Sovereign Wealth Fund, Mubadala, Boeing and AE Industrial Partners.
After going public in October 2019, Virgin Orbit did not build a cash vault, unlike sister company Virgin Galactic, which increased its cash reserves to over $1 billion through the sale of stock and bonds. And that meant management should have sat down and made changes to run the company in a leaner way, one person stressed, rebuilding momentum.
And Virgin Orbit’s apparent strength in the national security sector began to wane. Despite half the missions flying Space Force satellites, the company lost to competitor Firefly He Aerospace in the launch contract under its “Tactical Response Space” program. The mission awarded in October seemed right down Virgin Orbit’s alley, especially since previous missions under its Space Force program flew on similarly air-launched Pegasus rockets.
As the financial situation deteriorated, some bankers who spoke to CNBC wondered why the search for a deal had dragged on. According to one banker, Virgin Orbit could quickly raise $10 million to $15 million to break the ice while it finds a big buyer. Another investor estimates that Virgin Orbit’s net tangible worth is around $270 million, further raising the prospect of a wholesale deal despite a plummeting market value. .
The White Knight appeared last week in the form of Matthew Brown, 11 hours trading It is reportedly planning to inject as much as $200 million into Virgin Orbit. However, the negotiations broke down within days. The company continued talks with another unnamed investor last week.
However, in Hart’s words on Thursday, Virgin Orbit “couldn’t secure the funding to provide a clear path for the company.”
And while the 675 employees laid off Thursday likely have promising hiring prospects, Virgin Orbit now appears doomed to bankruptcy.
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