Shulou(Shulou.com)11/24 Report--

Virgin Orbital encountered an anomaly Monday when it launched its first rocket in Britain, failing to put nine satellites into orbit as planned after successfully separating from the carrier plane.

The loss cost nine small satellites and sent Virgin Orbital shares down more than 22 percent after hours Tuesday. To add insult to injury, Virgin Orbit's finances had been in dire shape before the launch. Some financial analysts believe the company will run out of cash in March.

Virgin Orbit was founded in 2017 and is primarily engaged in launching small rockets from the air using modified Boeing 747 aircraft.

With no revenue, Virgin Orbit has been funded for most of the past decade by Richard Branson's Virgin Group and Mubadala Investments, the United Arab Emirates investment arm.

The industry estimates that Virgin Orbit has spent $1 billion (currently about 6.78 billion yuan) over the past decade to develop and test the Launcher 1 rocket and air launch system. Virgin Orbit launched its first successful rocket in January 2021 and has since flown an average of one mission every six months.

An obvious question is how Virgin Orbit can remain financially sustainable with a single launch costing as much as $12 million (currently about 81.36 million yuan), plus development costs so high and launch pacing so low.

In 2021, Virgin Orbit met its short-term cash needs through a merger listing with a special purpose acquisition company (SPAC). However, the listing raised far less money than expected. Virgin Orbit said in announcing its intention to go public that it expected to raise $383 million from the deal, but ended up raising only $68 million through a merger listing and had to raise another $160 million through private investment to stay afloat.

As of September 30,2022, Virgin Orbit reported a net loss of $139.5 million (currently approximately RMB 946 million) for the third quarter of 2022, and "cash and cash equivalents" on hand of $71.2 million (currently approximately RMB 483 million).

Branson reinvested $25 million in Virgin Orbit through unsecured convertible bonds on Nov. 4 last year. During its third-quarter earnings call Nov. 7, Virgin Orbit said it would "seize opportunities in capital markets to fund growth. "It follows company executives saying they are looking to raise more money through equity issues.

Two weeks later, Virgin Orbit announced a "cessation" of these financing activities. "Given current market conditions, the company has decided not to pursue the offering," the company said. Any future financing deals will depend on market conditions at the time. "

Branson invested another $20 million in Virgin Orbit on December 19. The financing was secured by all the company's assets. Financial industry sources say issuing covered bonds is a red flag because it makes it harder to raise additional capital. Branson certainly has the option of adding more investment to Virgin Orbit in 2023. However, with the recession looming and threatening Virgin Group's other assets, it's unclear whether Branson will be able or willing to continue to maintain Virgin Orbit's cash flow.

Earlier in 2022, Virgin Orbit also signed an "equity agreement" worth up to $250 million with Yorkville Advisors, an investment firm. But it's not really Yorkville Advisors 'investment in Virgin Orbit, it's a mechanism for Yorkville Advisors to sell shares to ordinary investors.

Essentially, the deal provides Virgin Orbit with an upfront investment of $50 million, but Virgin Orbit can't get another $200 million until it pays back that investment. Repaying or "cashing in" too quickly on the $50 million financing could have a detrimental effect on Virgin Orbit's share price, so the company is unlikely to get $200 million before the summer of 2023.

Financial analysts had estimated that assuming Virgin Orbit burned $20 million a month, the company would only have cash on hand until March of this year. Virgin Orbit therefore needs to raise a lot of money to avoid bankruptcy.

Because of Monday's launch failure, the Launcher One rocket may be grounded for at least a few months, making it unrealistic to take money from the launch contract. Perhaps Virgin Orbit's most likely source of funding is the British government, which spent $500 million in 2020 to rescue the failing satellite company OneWeb. The British government explained the deal by saying it wanted an independent navigation service.

Is the British government willing to do this for Virgin Orbit? Some analysts believe that placing Virgin Orbit's spaceport in Cornwall would give Britain the ability to launch rockets autonomously. However, several UK-based companies, including Orbex and Skyrora, could have the rocket launched within a year or two. So it doesn't seem so rational for the British government to invest in Virgin Orbit.

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