Virgin Orbit is on the verge of collapse. Is the sector failing?

Virgin Orbit is on the verge of collapse. Is the sector failing?
Photo by Lisha Riabinina / Unsplash

A once-promising player in the aerospace sector could go bankrupt as early as this week. This month Virgin Orbit announced that it was laying off almost all personnel and suspending operations. The company was left with two options: either find financing or sell the business. True, Reuters has already reported a tentative deal for $200 million in financing.

What's wrong? The company's problems began after it went public through SPAC. It managed to raise only $228 million against an expected $483 million. Since then, VO has been trying in every way to find money. The projects stood still and the company failed to reach the required rate of production and launching rockets.

Of recent failures: the launch in Great Britain had to be cancelled because of an "anomaly" in the second stage of the launch vehicle. The shares went down after that.

Now the company can't be sold even for $200 million, although when going to the stock exchange price reached $3.7 billion. Virgin Galactic, the parent company, is also not doing well: the loss in Q4 has doubled even after the SPO. The main problem for the sector: the need for huge investments. And it's high risk. The year 2022 has significantly reduced risk appetite, and companies with limited access to new funds are trapped in their business.

On the other hand, failures are not common to the entire sector. There's SpaceX, there's Blue Origin. But their value to investors is provided by real and ongoing projects, not a couple of private launches a year. And they are private companies, so they have a different approach to management. In addition, they cooperate with NASA, which gives them access to state investment.