It’s been a tough first quarter of 2023 for Virgin Orbit, Sir Richard Branson’s US-based flagship satellite launch company. First, the company had a disastrous UK launch attempt in January. the launch failed after a problem with the rocket’s second stage engine. The company’s already precarious financial situation became critical after the failure. As Ars’ Eric Berger reported at the time, several financial analysts predicted the company would run out of money sometime in March.
These analysts proved to be quite prescient. BBC News reports that the beleaguered company will cease operations on Thursday and lay off nearly all of its staff, although the company did not officially confirm the layoffs to BBC News. In a statement, the company said simply: “Virgin Orbit is beginning a company-wide shutdown, effective March 16, 2023, and expects to provide an update on continued operations in the coming weeks.” Shares fell 18.8 percent to 82 cents (72 p.m.) in extended trading in response to the news.
According to previous coverage, Virgin Orbit was started as an idea in 2011 by Branson as an offshoot of his space venture Virgin Galactic, with the goal of fully exploiting White knight aircraft. Ultimately, it was decided that the company, officially created in 2017, would use its own aircraft, a modified Boeing 747-400 named Secular girl, as a platform from which he could drop and launch small missiles. It was financed for most of the decade by the Virgin Group, the multinational company that owns and manages Branson’s various businesses, as well as an Emirati state-owned holding company Mubadala Investment Company.
There have long been questions about the company’s long-term financial viability. Independent estimates show that Virgin Orbit has spent up to $1 billion developing and testing its LauncherOne rocket and air launch system. The company made its first successful launch in January 2021 and has since averaged one mission every six months. Virgin Orbit went public in 2021, but raised just $68 million and had to turn to private equity for an additional $160 million to stay afloat.
More recently, Branson has been supporting the company’s finances. It invested $25 million in November 2022 and another $20 million in December 2022. Importantly, this was secured Note, giving Branson priority as a creditor for the company’s assets, including “all aircraft, aircraft engines (including aircraft spare parts) and related assets.”
The January 9 launch failure came after four consecutive successes. First stage engine shutdown appeared to be nominal, with the second stage igniting to complete the 8.5 minute burn in low Earth orbit. Thirty-five minutes after the rocket ignited, and long after it should have reached orbit, the company tweeted that a problem had occurred. “It appears we have an anomaly that has prevented us from reaching orbit. We are evaluating the information.” the company said via Twitter.
Virgin Orbit did not provide additional details about the cause of the accident, which resulted in the loss of nine small satellites on board. However, according to BBC News, “Virgin Orbit later said the mission failed because a rocket fuel filter had detached, causing one of the engines to overheat.”
Officials tried to put a brave face on the outcome of the mission and the future of Virgin Orbit. However, in February, Virgin Orbit officially informed investors that it had raised an additional $10 million from Branson-owned Virgin Investments Limited, further heightening concerns about the company’s financial solvency. As Ars reported:
This week’s financial revelations are worrying for a number of reasons. The $10 million figure is very low, providing only a few weeks of funding for the company given its high overhead and large payroll. 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 interest rates of 6 percent. And finally, the new filing contains a separate security agreement that expressly converts Branson’s November unsecured note into a secured obligation.
Based on Virgin Orbit’s cash on hand last October, the investment from Branson likely extends the company’s financial runway until at least April 2023. So before or during the March earnings call, it’s possible the company to announce some kind of “review” of its strategic choices as it seeks to remain financially solvent.
Stay tuned for more details as they become available.