Branson contributes $11 million for compensation of laid-off personnel at Virgin Orbit.
The head honcho has stated that the business will be shutting down its activities for an indefinite period of time due to difficulty in securing fresh funding from investors.
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Virgin Orbit, a rocket launch company that has found itself in financial trouble, has received a much-needed boost from Sir Richard Branson. The British billionaire is investing $10.9 million in the company, which has been forced to cut its workforce by 85%. The company's attempts to secure funding from other investors have also been fruitless, making Branson's investment an especially welcome development.
The head of the company, Dan Hart, informed the staff earlier today that the company will close down without any fixed timeline.
Virgin Investments, which is owned by Branson, has provided a significant amount of funding to cover the majority of the severance pay for around 675 employees, according to a source familiar with the situation. This means that only 100 workers will remain employed while CEO Dan Hart looks for a solution to save the company.
The business has been having discussions with at least one investor who deals with finances in the past few days.
Virgin Orbit has disclosed in a submission to the US Securities and Exchange Commission that it expects to bear expenses of around $15 million related to workforce downsizing.
Branson invested in Virgin Orbit through a type of bond called a senior secured convertible bond. This bond gives Virgin Investments the highest level of security and priority over almost all of Virgin Orbit's assets, including planes, engines, spare parts, and related assets (with some exceptions). This is important because it means that if Virgin Orbit goes bankrupt and has to file for Chapter 11, Virgin Investments will have the first claim on these assets. Unfortunately, it seems more and more likely that Virgin Orbit will indeed have to file for bankruptcy due to Hart's recent announcement.
In March, Virgin Orbit, which originated from the company Virgin Galactic owned by Branson, declared it would be putting its employees on unpaid leave for a period of one week. This decision was made to allow the company some time to source emergency capital.
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The team has been facing a shortage of money since the spring season of last year. It entered the market by utilizing a unique acquisition firm in 2021, which was valued at almost $4 billion. However, it obtained a lower amount of $220 million compared to the projected range of $300 million to $400 million. Furthermore, a botched rollout in the United Kingdom delayed their goal of expanding their mobile launch platform worldwide, adding more pressure to the company's financial state.
Virgin Orbit was wishing that the United Kingdom launch would initiate the global market for their distinct approach. Their organization has created the sole horizontal launch capacity available worldwide. They accomplish this by guiding a rocket beneath a modified Boeing 747 jumbo jet's wing at an altitude of 35,000ft. Subsequently, the rocket is separated, and it travels into space, carrying the satellites.
According to insiders at Virgin Orbit who spoke with Financial Times, the company is reportedly spending about $50 million every three months. So far, founder Richard Branson has poured over $1 billion into the company and invested another $60 million just last November.
In the third quarter of 2022, Virgin Orbit experienced a net deficit of $43.6mn, compared to a loss of $38.6mn during the same time period in the previous year. Additionally, the free cash outflow increased from $39.5mn to $52.5mn. Nonetheless, the company entered into a "strategic agreement" last year with Spire Global for numerous launches slated for 2023 and has secured a binding backlog of contracts totaling $143.1mn.