Virgin Orbit shares plunge after announcing ‘ceased operations’

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Shares in Sir Richard Branson’s Virgin Orbit tumbled more than 30 per cent on Friday after the rocket launch company said it was axing 85 per cent of its workforce having “ceased operations for the foreseeable future”.

The Nasdaq-traded shares were down more than 36 per cent by midday trading to 23 cents, having fallen from $1.32 since the start of the month as the company’s financial woes deepened.

The Financial Times on Thursday reported Branson, who owns 75 per cent of Virgin Orbit, had injected $10.9mn into the group to help fund severance payments for the 675 departing staff after the company failed to clinch rescue funding from new investors.

It also emerged on Friday that Virgin Orbit had set a remuneration policy for executives which, according to filings with the US Securities and Exchange Commission, could entitle chief executive Dan Hart to a pay-off of about $1.5mn or more should the company be taken over or become insolvent.

Virgin Orbit has been in talks with at least one financial investor about emergency funding in recent days. Just 100 employees remain to keep the company going while Hart makes last-ditch efforts to execute a deal. However, people close to the company said this now looked unlikely.

Branson has invested more than $1bn in Virgin Orbit since its founding, including $60mn since November.

The most recent injection was made via a senior secured convertible bond, which gives Virgin Investments “first-priority security interest on substantially all of [the company’s] respective assets, including all aircraft, aircraft engines (including spare aircraft parts) and related assets, other than certain customary excluded assets” should Virgin Orbit be forced to file for Chapter 11 bankruptcy protection.

The company, spun out of Branson’s Virgin Galactic in 2017, announced in mid-March that it was furloughing employees for a week while it sought new funding.

The group, which has been strapped for funds since spring last year, came to market through a special purpose acquisition company in 2021, valued at close to $4bn. But it only raised $220mn against expectations of $300mn-$400mn. Then a failed launch from the UK in January set back plans to take the mobile launch system global, further stressing company finances.

Virgin Orbit had been hoping the UK launch would open up the international market for its unique system. The company has developed the world’s only operational horizontal launch capability, flying a rocket under the wing of a converted Boeing 747 jumbo jet to an altitude of 35,000ft before it is released to fly the satellites to space.

Virgin Orbit insiders told the Financial Times the business was burning through about $50mn a quarter.

The company reported a net deficit in November of $43.6mn for the third quarter of last year, against a loss of $38.6mn in the comparable period of 2021. The free cash outflow also increased from $39.5mn to $52.5mn. However, the company last year struck a “strategic agreement” with Spire Global for multiple launches starting this year. It has also declared a binding backlog of contracts valued at $143.1mn.

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