Virgin Orbit, the space launch startup, have filed for Chapter 11 bankruptcy after failing to raise adequate funds to continue their operations. The company, a part of the Billionaire Richard Branson’s Virgin Group, is now trying to sell off its assets. Virgin Investments is providing Virgin Orbit with $31.6 million in Debtor in Possession (DIP) financing to help them manage this tough time. According to the records, Virgin Orbit has assets of $243 million and total debt of $153.5 million as of September 30th.
The company was founded by Branson in 2017 and launched their first commercial launch in 2021. It had been trying to raise enough funds since the mid of March this year. At the end of 2022, the company had about $50 million in cash on its balance sheet. They used about $175 million in the first nine months of 2022 to fund their business.
The bankruptcy process is proving to be beneficial for Virgin Orbit as it allows them to maximize the value of their assets. Brian Swint, Virgin Orbit’s Chief Executive Officer, shared his thoughts on the plan, “The Chapter 11 process represents the best path forward to identify and finalize an efficient and value-maximizing sale.”
It was founded by the billionaire entrepreneur, Richard Branson, with the intention of providing small satellite launch services. The company experienced a great start but failed to raise sufficient funds to ensure their operations. Unfortunately, the company has now declared bankruptcy after failing to gain access to enough capital.
The news of Virgin Orbit has definitely made a ripple in the stock market and the investors have been quite alarmed. The share prices of Virgin Orbit (VORB) have declined by 23% in pre-market trading. Other space startup stocks, such as Astra Space (ASTR) and Rocket Lab USA (RKLB), are also seeing a rise and fall in their stock prices. Rocket Lab has the larger business, generating over $200 million in 2022 sales whereas Astra only generated less than $10 million in the same year. Virgin Orbit, on the other hand, had a revenue of about $33 million in the same year.
It will be interesting to see how the stocks of these companies react after the news of Virgin Orbit filing for bankruptcy provesses. It could potentially be a wake-up call for other companies in similar circumstances and a lesson to be learned from the course of events. It would be wise to maintain a decent cash balance, so that in a situation similar to Virgin Orbit, a distressful bankruptcy can be easily avoided.