News of the operations halt, failed funding, and job cuts did not sit well with shareholders as Virgin Orbit saw its shares are down 50% after the announcement.
Aircraft engineering company Virgin Orbit Holdings Inc (NASDAQ: VORB) has revealed plans to halt operations after failing to secure a funding lifeline as expected. The company’s CEO, Dan Hart, relayed the unfortunate news to employees on Thursday, adding that there would be a massive layoff. Before the move to halt operations, there were words on the street that Virgin Orbit was expecting a $200 million investment from venture capital investor Matthew Brown. Reuter cited a term sheet that shows that the company was about to close a deal with the investor via a private share placement.
Virgin Orbit Moves to Halt Operations Amid Financial Crisis
The news came to light while Virgin Orbit was on the verge of going bankrupt. Hence, the expected capital was crucial to the company’s survival as it is in its most challenging financial mess since its inception. The firm recorded an almost $44 million loss in the third quarter. During the same period, its cash reserve plunged from $122 million to $71 million. In addition to the expected investment from Brown, there were rumors that Virgin Orbit was discussing with two restructuring firms for financing. The said firms are Ducera and Alvarez & Marsal (A&M).
However, all efforts to secure a funding lifeline have proved abortion for Virgin Orbit, who has resorted to halting all operations. The CEO revealed that the company could not secure the funding that would have provided “a clear path” out of the current financial situation. During an all-hands meeting, he explained that Virgin Orbit is left with no choice but to halt operations and “implement immediate, dramatic, and extremely painful changes.”
As a result of the “painful changes,” Virgin Orbit is dismissing almost all of its workers. The company will fire all but 100 positions. The company noted in a filing that the layoff would affect 675 positions or approximately 85%. With concern in his voice, Hart said:
“This company, this team – all of you – mean a hell of a lot to me. And I have not, and will not, stop supporting you, whether you’re here on the journey or if you’re elsewhere.”
Virgin Orbit’s Shares
News of the operations halt, failed funding, and job cuts did not sit well with shareholders as Virgin Orbit saw its shares drop 50% after the announcement. The company’s stock is currently trading at $0.17. The aircraft engineering company has lost over 95% in the last twelve months.
To support the departing workers as it halts operations, Virgin Orbit promises severance packages. At the same time, the CEO said there would be cash payment and an extension of benefits. Hart mentioned providing a “direct pipeline” with sister company Virgin Galactic (NYSE: SPCE) to help victims of the job cuts find new positions.
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