By Loren Grush and Siddharth Philip
Richard Branson was long a force to be reckoned with in the booming private space business.
The British serial entrepreneur beat fellow billionaire Jeff Bezos to the first cosmic tourist trip with his Virgin Galactic venture. Branson’s second space foray, Virgin Orbit, strapped rockets under the wing of a jumbo jet to launch satellites on their flight path, complete with mission monikers like “Start Me Up” that reflect his distinctive blend of business and bravado.
Billionaire Richard Branson has stopped putting in money to prop up Virgin Orbit.Credit: PA
But following a serious misstep in January, when Virgin Orbit’s quest for the first-ever launch from the UK failed because of a technical malfunction, the once high-flying enterprise is on the brink.
Shares of the company fell 33 per cent, its steepest one-day loss ever, to close on Monday at 54 US cents a share.
With cash running out and the next launch attempt unclear, management placed workers at the Long Beach, California, headquarters on furlough. As the company seeks rescue financing or bankruptcy, the financial risk for employees, suppliers and other investors is sizable. And yet one major stakeholder has distanced himself from the struggling venture: Branson himself.
The billionaire, 72, whose Virgin Group has pumped more than $US1 billion ($1.5 billion) into Virgin Orbit, including $US60 million in the past six months, hasn’t recently put in the money now needed to prop up the venture.
That forced the company to speak to external investors such as little-known Texas-based venture capital funder Matthew Brown.
Last week, Brown touted himself as a possible saviour of a business that was worth billions just a year ago. But his financing deal collapsed over the weekend, CNBC reported on Monday, leaving Virgin Orbit potentially still looking for a suitor.
’First domino to fall’
Branson’s reserve coincides with growing caution among investors in an industry in which the technical risks are as high as the costs to surmount them.
It marks a reversal for the businessman, a pioneer of the COVID-era SPAC boom for space companies that used the special-purpose-acquisition-company approach to provide startups with a rapid route to the public markets, potentially before they were ready for the scrutiny that comes with it.
Kelly Latimer is the only female test pilot for Virgin Galactic and Virgin Orbit.Credit: Los Angeles Times
After Virgin Galactic in 2019, Virgin Orbit followed with its market debut in late 2021, commanding a value in excess of $US3.5 billion, after completing just two successful flights. Unlike competitors that use ground-based launch systems, Virgin Orbit sends small satellites to space on its LauncherOne rocket blasted from beneath the wing of a Boeing 747.
It’s a very specific market, and one that experts warn may not support many players.
“Virgin is the first domino to fall,” said Caleb Henry, director of research at space advisory firm Quilty Analytics. “There will be more hard times for SPAC companies going forward.”
Spectators watch on a big screen at Cornwall Airport in England on the night of Virgin’s space failure.Credit: Getty
Virgin Orbit declined to comment, as did Branson’s Virgin Group. Brown, the Texas investor, did not immediately respond to questions.
There were warning signs from the outset. Virgin Orbit had sought to raise almost $US500 million by going public, but the blank-cheque merger generated gross proceeds of less than half that, at $US228 million. Then two successful launches in the US appeared to put doubters at ease, before the high-profile failure in January.
When a company-wide meeting was scheduled earlier this month, employees began bracing for bad news. They soon learned on a video conference with Chief Executive Officer Dan Hart and the head of human resources that most of the employees would be on furlough while the company temporarily shut down.
Virgin Orbit began bringing back some employees last week and pledges to stay focused on its next launch, but its troubles are giving the space industry a jolt.
After years of growth fuelled by easy SPAC cash and stargazing billionaires, startups vying for a SpaceX-like trajectory are now finding a more hostile environment. Blank-cheque deals for launch providers, satellite makers and space-tech specialists have slowed, while private investment in the industry tumbled 58 per cent last year, according to venture firm Space Capital. The financial turmoil sparked by Silicon Valley Bank’s collapse is expected to add more challenges.
“The world we’re in has changed,” said Carissa Christensen, founder and CEO of advisory firm Bryce Space and Technology. “It’s changed in terms of available capital, it’s changed in terms of risk tolerance, and just generally the appeal of venture-funded startups.”
The risk of missteps is particularly acute in the highly technical, capital-intensive space business. That makes it even harder to recover from a failure like Virgin Orbit’s.
The January 2023 flight would have been the first orbital launch to take off from British soil. While Virgin Orbit is based in California, its name and ties to Branson made it a logical choice to usher Britain into the ranks of space nations.
The mission started as planned, with the 747 taking off from Spaceport Cornwall in southwest England and successfully deploying the LauncherOne rocket. The company even mistakenly tweeted that the vehicle had reached orbit, before clarifying that it had suffered a mid-flight malfunction, destroying the nine customer satellites onboard.
Virgin Orbit and Astra Space are among the many companies seeking to capitalise on the so-called small satellite revolution. With smaller rockets, the businesses aim to offer less-expensive, more customised launches for customers.
But that market is already under threat from larger launch providers, like Elon Musk’s Space Exploration Technologies, which have started offering ride shares, flights that pack multiple small satellites onto one larger rocket and send the payloads to orbit in batches. That can save customers money even though the overall launch cost is higher.
The small launch market “has room for one or two” companies, Tory Bruno, CEO of United Launch Alliance, said during a panel at a satellite industry conference in Washington on March 15. “So Rocket Lab, perhaps, and one other, at most.”
Elon Musk and SpaceX CEO Elon Musk is in competition with Branson and Virgin Orbit.Credit: AP
Success for launch companies may mean doing more than just launches. SpaceX builds satellites and offers broadband internet through its Starlink business, while Rocket Lab also has its own satellite manufacturing arm.
“Launch alone doesn’t make a business,” Anderson said. “All of the launch companies that have successfully made it to orbit, starting with SpaceX, will tell you that the launch market isn’t enough to support a business. They’re all doing other things.”
Bloomberg
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