WASHINGTON (Reuters) – Virgin Orbit Holdings Inc. (VORB.O), founded by billionaire Richard Branson, filed for Chapter 11 bankruptcy on Tuesday after the satellite launch company struggled to secure long-term financing after a failed launch in January.
The filing comes less than two years after Virgin Orbit went public at a valuation of nearly $3 billion. But the January debacle left the company scrambling for new funding and forced it to halt operations.
“We believe the Chapter 11 process represents the best path forward to identify and close an effective sale and maximize value,” Virgin Orbit CEO Dan Hart said in a statement.
The company, which spun off from space tourism company Virgin Galactic in 2017, sends satellites into orbit using rockets launched from a modified Boeing 747.
The Long Beach, California-based company filed for a sale of its assets in a Delaware court days after announcing it was laying off nearly 85% of its 750 employees.
Virgin Orbit listed assets of approximately $243 million and total debt of $153.5 million as of September 30. The company went public in December 2021 through a blank check merger, raising $255 million less than expected.
The value of the company was $65 million at the close of Monday’s trading. On Tuesday, its shares fell 24% to trade at just 15 cents per share.
The company’s sixth mission in January using the LauncherOne rocket, the first to be launched from Britain, failed to reach orbit, sending its payload of commercial and defense research satellites plunging into the ocean.
The unfortunate incident involving the Cornwall spaceport in the UK forced the company to cease operations and furlough almost all of its staff in March to conserve cash.
Virgin Orbit’s business model was created to launch small missiles and deliver launches on short notice from anywhere, including for tactical military purposes, to meet a need most notably the conflict in Ukraine.
But the demand for larger launch rockets and more cost-effective combined payload launches on the SpaceX Falcon 9 rocket over the past two years has increased the competitive stakes.
Venture investments in space startups fell 50% year-over-year in 2022 to $21.9 billion, according to VC Space Capital, as the cost of capital increased as global interest rates rose.
“The changing capital markets and the high interest rate environment made it difficult to obtain new capital,” Hart said in a court filing. The company is also experiencing “significant pricing pressure from well-capitalized competitors in the commercial launch market,” he said.
[1/5] Richard Branson, founder of the Virgin Group, poses for a photo aboard his new cruise ship, the Scarlet Lady, at the Port of Dover in Dover, Britain, February 21, 2020.
The British Space Agency said Britain, which has two vertically launched spaceports due to debut next year, remains committed to being the main provider of commercial small-satellite launches.
Two of the satellite makers that lost high-tech payloads in the botched January launch, Britain’s Space Forge and Poland’s SatRev, in which Virgin Orbit owns 4%, said they had backup plans for replacement launch vehicles as needed.
Virgin Group Finance
The Virgin Branson Group, which owns roughly 75% of the launched company, said it has invested more than $1 billion in the unit, including $60 million in secured loans since November.
Abu Dhabi’s sovereign wealth fund Mubadala is the second largest investor, with a stake of 17.9 percent.
The two companies said Virgin Investments, a unit of the Virgin Group, will offer $31.6 million to Virgin Orbit while it searches for a buyer.
Despite the success of his travel and communications businesses, Branson has been associated with a number of high-profile business failures in his career dating back to the 1970s.
Reuters reported last month that Texas-based Matthew Brown was in talks to invest $200 million in Virgin Orbit. Sources told Reuters last week that those talks had broken down.
The filing showed that Virgin Orbit’s largest creditor was London-based Arqit Ltd, which owed nearly $10 million for services and customer deposits.
Arquette declined to comment.
In 2021, Arqit Quantum (ARQQ.O) and Virgin Orbit announced a deal to launch two satellites to provide encryption services to the “Five Eyes” countries: the United States, the United Kingdom, Canada, Australia and New Zealand.
Arqit Quantum said in December that it would abandon its satellite development efforts and find a way to provide secure encryption through an unspecified “terrestrial infrastructure”.
The US Space Force, part of the US military, was Virgin Orbit’s second largest creditor with a deposit of nearly $6.8 million for future launches. She had no immediate comment.
(Reporting by Joy Roulette in Washington, Janavi Nedumulu in Bengaluru, Kevin Krolicki in Singapore, Crystal Ho in New York, Joanna Plosinska in London and Tim Hever in Paris; Editing by Jamie Freed, Jason Neely and Jonathan Otis
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