🚀 Can Virgin Orbit Find The Right Orbit?
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🚀 Virgin Orbit: SPAC In The Orbit?
Sir Richard Branson's second space company, Virgin Orbit (VORB), was one of the last SPAC deals in 2021. However, the company raised only half of its $500M target. The Virgin Group, in fact, had to make a last-minute injection of $100M to get the deal done. Underwhelming debut for sure! (Tweet This)
Virgin Orbit was spun-off from Virgin Galactic in March 2017. The company is led by Dan Hart, a former Boeing executive. The company focused on human spaceflight operations, small satellite launches, and advanced aerospace design, manufacturing, and testing. It also developed the air-launched LauncherOne rocket.
The LauncherOne is a two-stage orbital launch vehicle designed to carry small loads of up to 300 kg into Sun-synchronous orbit. A modified Boeing 747-400 called Cosmic Girl scales to a high altitude, and from there, LaunchOne takes off to go even higher.
In 2015, Virgin Galactic signed a contract with OneWeb for 39 satellite launches with an option to launch an additional 100 satellites. As luck would have it, even as Virgin Orbit started operating independently, OneWeb canceled all but four launches, prompting the former to file a lawsuit. OneWeb filed for bankruptcy protection in 2020.
After a series of postponements, LauncherOne’s first flight took place in May 2020. However, the flight failed after a few seconds as the first stage engine saw a premature shutdown. The first successful flight took place in January 2021, when it delivered a payload of 10 CubeSats to low Earth orbit. In 2022, LauncherOne has seven flights scheduled for the year.
Virgin Orbit has another subsidiary called VOX Space, focused primarily on the national security launch market. In April 2020, VOX Space was awarded a contract from the newly formed US Space Force, worth $35M for three launches of 44 CubeSats.
A Sub-Par Launch?
Virgin Orbit decided to go public in August last year by merging with a SPAC, "NextGen Acquisition Corp. II." The company was valued at $3.2B and included an investment from Boeing. However, the company's "launch" in the public markets was lackluster. Shares fell 8% on debut before trimming their losses to 1.2%.
Since then, the stock has declined 12% on Friday and a further 9.2% on Monday. Virgin Orbit blamed its poor listing performance on "market conditions," adding that the company is fighting some "pretty big headwinds" at the moment.
The listing fetched the company $228M, far below the anticipated $483M. Investors in the SPAC, who were expected to contribute $383M of that share, contributed only a paltry $68M. Virgin Group came to the rescue along with Mubadala, Boeing, and AE Industrial Partners to contribute the remaining $160M to see the listing through.
Virgin Orbit sees these funds as growth capital to further scale rocket manufacturing, grow its space solutions business, and other product development initiatives. Existing shareholders of the company will retain 85% of the merged entity, while shareholders of NextGen will hold approximately 10%. The rescue group that saved the listing has the remaining 5%.
As a theme, launch companies have had a challenging time after listing. Shares of Astra Space, another SPAC merger candidate that went public last June, are down 32%. Rocket Lab USA is down 50% from its peak of $21.34.
Only through more commercial launches will Virgin Orbit be able to turn the sentiment in its favor. But can its share price find the right orbit even if it manages a proper lift-off? It's a wait-and-watch game for now, not from Cape Canaveral, but from this very space (pun not unintended)!
VORB ended at $6.83, down 6.44%.
Company Snapshot 📈
VORB $6.83 -0.47 (6.44%)
Today's Market Terminology: Horizontal Acquisition
A Horizontal Acquisition is a merger or acquisition transaction between two companies that produce similar goods and services
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