While it has been expected for a while, CNBC broke the story that Virgin Orbit had taken the decision to have an “operational pause” meaning that it would temporarily lay off (furlough) staff and suspend operations. With a cash burn of about US$40-50 million a quarter and few imminent cash-generating LauncherOne launches – a situation not helped by the failure of its air launch attempt from Newquay, Cornwall, UK – analysts had been predicting since last year that Virgin Orbit would not have enough cash to continue much further.
The company had US$71.2 million in cash at the end of Q3 2022 to which was added US$55 million funding, mainly from Richard Branson’s Virgin group which has first dibs on its assets should the company fail.
The company initially seemed to have found its saviour in the form of Texas-based private investor Matthew Brown. The two parties were reportedly in late-stage discussions to close a US$200 million investment in Virgin Orbit via a share placement. Things were looking up and Virgin Orbit even announced an “incremental” return to work for a small set of its employees. However, the turbulence showed little signs of abating as, over the course of a weekend, the conversation broke down.
Unluckily for Virgin Orbit, a separate rescue deal with another potential buyer also nosedived. Consequently, the company was forced to lay off 85 per cent of its staff on 30 March and formally declare an end to its operations. CEO Dan Hart said: “We have no choice but to implement immediate, dramatic and extremely painful changes,” in an all-hands call with employees, obtained by CNBC. Thanks to a US$10.9 million injection of cash from Richard Branson, the majority owner of the company, the 675 staff being laid off will receive severance payments.
Update on 4 April 2023: Virgin Orbit formally went into Chapter 11 bankruptcy protection from its creditors as it tries to re-arrange its finances.
Comment by David Todd: It was inevitable that the Virgin Orbit operation would fail unless more funding was generated. With the company having no choice as it makes its last desperate attempt at survival, it took the decision to lay off staff and suspend operations. It seems there were few genuine takers for the operation. However, while Virgin Orbit may soon be dead as an entity, if its development costs and debts are written off, its assets might be picked up for a song and operated profitably for a while, at least until competition in the small launch market becomes too fierce.
LauncherOne under Boeing 747 Cosmic Girl. Courtesy: Virgin Orbit/Greg Robinson
