Key takeaways
- Richard Branson’s private space company has come crashing back down to Earth after filing for bankruptcy
- The move comes after it laid off 85% of its workforce last week
- Shares have plummeted to just $0.19, with sister company Virgin Galactic shares also dropping 4.2% in a day
Things aren’t looking good for British billionaire Richard Branson’s commercial space dreams. Virgin Orbit, Virgin’s satellite transport business, has filed for bankruptcy and put itself up for sale.
It’s been a rough time for the Virgin Galactic spin-off, which also laid off 85% of its workforce last week. The company failed to secure additional funding, after a disastrous launch in January left investors concerned about the business’ future. Share prices have plummeted as the company searches for a new owner.
But where does this leave the wider commercial industry and how has the collapse affected other players in the market? Here’s the details.
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What’s happening at Virgin Orbit?
Early on Tuesday it emerged the company, which is 75% owned by British billionaire Richard Branson and headquartered in California, had filed for Chapter 11 bankruptcy protection in the US.
The warning signs were already there. In a recent SEC filing, the company said its “liquidity condition raises substantial doubt about the company’s ability to continue as a going concern for at least 12 months”.
Now up for sale, the company listed $243 million worth of assets and $153.5 million worth of debts as of September 2022. Virgin Orbit’s CEO, Dan Hart, said “At this stage, we believe that the Chapter 11 process represents the best path forward to identify and finalize an efficient and value-maximizing sale.”
Branson had already injected over $70 million in cash into the business to try and keep it afloat, but those efforts have failed. Virgin Investments will fund Virgin Orbit with $31.6 million to keep operations running while it’s up for sale.
Virgin Orbit’s tale of woe
It’s been a disastrous quarter for the company, which has been hit with bad headlines and plunging stock before the bankruptcy filing. In January a historic launch for the UK turned into bitter disappointment as Virgin Orbit’s rocket, LauncherOne, failed in its mission to transport nine satellites.
This led to difficulties securing funding, which it had been trying to get since mid-March, where it furloughed almost all of its 800-strong workforce. When no money appeared, Virgin Orbit was forced to lay off 85% of the company, or around 700 jobs. The share price tanked at the news, dropping a massive 38% in after hours trading.
What was the market reaction?
Virgin Orbit stock itself has gone from a high of $10.47 in July 2021 to just $0.19 by Monday. The company’s overall value has plummeted from heights of $3 billion to just $65 million.
Virgin Orbit’s sister company, Virgin Galactic, dropped in value by 4.2% on the same day to hit a low of $3.88. The business is gearing up for commercial space flights, but its Q4 results for 2022 showed an adjusted EBITDA loss of $133 million, up from $65 million in losses the same time last year.
Virgin Orbit and Virgin Galactic are the only two publicly traded commercial space companies. Competitors SpaceX and Blue Origin haven’t announced plans to trade publicly, though rumors have swirled around the two.
Investors have always been interested in SpaceX, with no signs of slowing down despite the economic downturn. The company is said to be raising $750 million in its next funding round, with an anticipated valuation of $140 billion.
Could the private space industry be in trouble?
With an emerging industry it’s always tricky to predict whether it will sink or swim, though the main issue facing commercial space exploration now that Virgin Orbit has folded, is lack of competition in the sector.
SpaceX is the dominant player in the field. Founded by billionaire Elon Musk, the company revolutionized space flight with its reusable rockets, and has been working with NASA for transport and missions since 2014.
In February it was announced Jeff Bezos’ space transportation company, Blue Origin, had secured a contract with NASA for a trip to Mars with its New Glenn heavy-lift rocket. The rocket hasn’t been tested yet, so the launch will be a deciding factor in whether SpaceX has a run for its money or not.
While the loss of Virgin Orbit is a blow to the industry and Virgin Galactic is taking heavy losses, the future of the industry looks bright. Last year the industry grew at its fastest annual rate since 2014, hitting $468 billion. SpaceX is looking to launch 100 times in 2023 after completing 61 launches last year.
SpaceX is an older company and further ahead than its competitors, but with governments and private investors pouring money into the industry, the impact of Virgin Orbit’s collapse is looking like a bump in the road of an otherwise upwards trajectory.
The bottom line
Virgin Orbit’s demise is a sad loss for the commercial space industry, and an interesting development for investors to take note of given it was the only publicly traded company in the sector.
But on the whole, commercial space is an emerging market which Wall Street will be keeping a close eye on throughout the economic uncertainty. As the industry continues to innovate, making commercial spaceflight easier and cheaper, we could see this market boom over the next decade.
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