Virgin Orbit announced late March 30 it was laying off the vast majority of its employees after failing to raise additional funding, putting the launch company’s future in jeopardy.
In a Securities and Exchange Commission filing, Virgin Orbit announced it was laying off approximately 675 employees, or 85% of its workforce. The company said the layoff was necessary “to reduce expenses in light of the Company’s inability to secure meaningful funding.”
The company, which operates the LauncherOne air-launch system, had furloughed most employees March 15 as part of a pause in operations as it sought to raise money. A week later it brought back a small number of employees to continue preparations for the next LauncherOne mission from the Mojave Air and Space Port in California.
At the time Virgin Orbit brought back those employees, it was in discussions with Matthew Brown, a Texas venture capital investor who claimed to have invested in more than 13 space-related companies, although he was not a familiar name in the industry. Brown said in an interview with CNBC March 23 he was in “final discussions” with Virgin Orbit that he expected to close within a day. That investment was reported to be worth up to $200 million.
However, the deal fell through several days later. Virgin Orbit worked to find another investor but, as of March 30, no deals were imminent.
Virgin Orbit had been heading towards a cash flow crisis for months as it burned through its remaining cash reserves. The company, in its most recent earnings call Nov. 7, ended the third quarter with $71 million in cash on hand and an operating loss of $50.5 million in the quarter.
The company subsequently raised $60 million in four separate debt financings from Virgin Investments Limited (VIL), the investment arm of Virgin Group. Those deals came with interest rates as high as 12% and gave VIL “first-priority security interest” to Virgin Orbit’s assets, including its Boeing 747 aircraft.
Virgin Orbit’s financial problems were exacerbated by the failure of its most recent LauncherOne mission Jan. 9, which the company ultimately blamed on a fuel filter that came loose in the rocket’s upper stage, leading to a premature shutdown of the engine. When the company announced the employee furloughs, it said it was nearly done with the investigation and had its next rocket in the final stages of integration and testing.
In the latest SEC filing, Virgin Orbit said it raised an additional $10.7 million from VIL, again at a 12% interest rate. While the company said the proceeds of previous loans would go to working capital, it said in this filing that the money would go towards employee severance and other layoff-related expenses, which it estimated to be $15 million.