Billionaire Richard Branson's rocket company, Virgin Orbit, filed for bankruptcy protection Tuesday after failing to find investors willing to cover its continued financial losses, just days after parting ways with most of its staff.
The company said it will work on finding a buyer while the Chapter 11 process plays out in U.S. Bankruptcy Court in Delaware. It already laid off 85 percent of its workforce, or 675 people, according to a securities filing last week, and paused operations.
"While we have taken great efforts to address our financial position and secure additional financing, we ultimately must do what is best for the business," CEO Dan Hart said in the statement.
Branson has not offered any public comment on the bankruptcy.
In bankruptcy filings, Hart describes a company whose lofty ambitions were frustrated by a punishing stock market, stiff competition that drove down prices, operational inefficiencies, and a much-anticipated launch that failed at an inopportune time.
Branson - who founded Orbit in 2017 as a sister firm to his larger spaceflight company, Virgin Galactic - still owned about 64 percent of it as of Tuesday. While Virgin Galactic ferries rich tourists into space, Virgin Orbit is in the business of delivering small satellites into orbit. Its LauncherOne rockets are designed to be air-launched from a modified Boeing 747-400 carrier the company calls "Cosmic Girl."
LauncherOne's selling point has been its ability to deliver payloads at any time, from anywhere, and into any orbit, differentiating it from the more predictable ground-based launches carried out by many of its competitors.
This capability is thought to be useful for national security customers like the U.S. Space Force, who may need to deliver satellites into orbit covertly or in challenging weather, analysts said. But the government-funded market for "tactical responsive space" has developed more slowly than expected, Hart said in a bankruptcy filing.
Virgin Orbit has a mixed record. It has carried out five launches that delivered 33 payloads into orbit, according to an accounting from the company, and achieved an early success in 2021, when it flew a rocket into orbit after taking off from the Mojave Air and Space Port in California. But in early January, its first attempt at an orbital launch from the United Kingdom failed when a malfunctioning fuel pump filter ended a rocket's burn too early, causing it to fall back to earth.
The company was slowed down by operational inefficiencies, Hart said. A tight labor market made it hard to hang onto workers, leading to "unprecedented" attrition, he said, while the coronavirus pandemic caused periodic shutdowns, disrupted its supply chain and made some employees sick, forcing them to stay home.
The failed U.K. launch was "very bad timing" in light of the company's other problems, said Carissa Christensen, chief executive of the aerospace consultancy Bryce Space and Technology.
"A successful launch could perhaps have had an effect here," she said.
The company, which focused on smaller launches, also suffered as many customers moved toward larger bulk launches that tend to be cheaper on a per-unit basis, Christensen said.
"Those satellites have taken the bus, not the taxi," Christensen said.
Virgin Orbit also confronted a challenging stock market. It went public in 2021 by merging with a publicly-traded shell company - also known as a "blank check" company or SPAC ― in an indirect method of reaching public investors that became popular before last year's market downturn.
The IPO attracted an eclectic mix of investors, including a sovereign wealth fund of Abu Dhabi, the billionaire hedge fund manager Leon Cooperman, several wealthy family offices, and others. But the offering failed to meet expectations, raising about $228 million in relation to the SPAC deal, far short of the $382 million anticipated, Hart said.
It became even harder to raise money throughout 2022 when central banks began raising interest rates, sending technology-specific stocks ― including many former SPACS ― into a downward spiral.
"It's a really bad time to be looking for investors," Christensen said.
In the third quarter of 2022, the most recent quarter for which detailed financials are available, Virgin Orbit reported a net loss of $43.6 million on revenue of $30.9 million. Bankruptcy filings made available Tuesday describe assets worth $242.9 million and $153.4 million in debt.
Branson's Virgin Investments firm funded the rocket company's severance costs through a $10.9 million convertible note. It will also provide $31.6 million in "debtor-in-possession" financing, pending approval from the Delaware Bankruptcy Court, to allow Virgin Orbit to keep operating while it searches for a buyer, Virgin Orbit said.
WASHINGTON POST