This week, Virgin Orbit formally notified investors that it has raised an additional $10 million from Virgin Investments Limited, an investment firm owned by Sir Richard Branson.

Exactly what this filing means for the company’s future will probably not become clear until Virgin Orbit releases financial details about its fourth-quarter earnings for 2022, and this may not happen until late March. But there are a few things in the filing that raise concerns about the financial solvency of the US-based small-launch company.

Virgin Orbit was founded in 2017 by Branson as a small satellite launch company. At that time, it was separated from Virgin Galactic, which is a suborbital space tourism company that aims to fly paying customers on short forays above 80 km. Virgin Orbit drops its LauncherOne rocket from a modified Boeing 747-400 named Cosmic Girl.

The company spent the better part of the last decade developing LauncherOne and integrating its operations with the aircraft at a cost of about $1 billion. During this time, it was funded by the Virgin Group, the multinational company that owns and operates Branson’s various businesses, as well as an Emirati state-owned holding company, Mubadala Investment Company.

As it sought to move from development into operations, Virgin Orbit went public by merging with a special purpose acquisition company two years ago. Its financial returns in 2021 and 2022, revealed as a result of going public, were not great. For 2022, the company has reported a net loss of $139.5 million through September 30.

Virgin Orbit had been achieving technical success with its rocket, however. After a failure on its initial test flight in May 2020, the company had four consecutive successes from January 2021 onward. However, on January 9, during the company’s sixth launch, the rocket’s upper stage suffered a failure, and its payloads did not reach orbit.

In the run-up to this mission, Branson had been propping up Virgin Orbit’s finances. In November 2022, he invested $25 million in an unsecured convertible note. A month later, Branson invested $20 million. Importantly, this was a secured note, giving Branson priority as a creditor for the company’s assets, including “all aircrafts, aircraft engines (including spare aircraft parts), and related assets.” As Ars reported earlier this month, it appears that after Virgin Orbit failed to raise equity capital and exhausted its other fundraising options in November, the company pledged all of its assets to Branson in December.

This week’s financial disclosure is troubling for several reasons. The $10 million amount is very low, providing only a few weeks of funding for the company given its high overhead and large payroll. Moreover, the note has an interest rate of 12 percent, which is double the rate of the November and December notes, which had interest rates of 6 percent. And finally, the new filing contains a separate security agreement that explicitly turns the unsecured November Branson note into a secured obligation.

Based on the cash Virgin Orbit had on hand last October, the investments from Branson likely extend the company’s financial runway into at least April 2023. Therefore, ahead of or during the earnings release in March, it’s possible that the company may announce some sort of “review” of its strategic options as it seeks to remain financially solvent.

https://arstechnica.com/?p=1913976