Here’s what went wrong with Virgin Orbit
Virgin Orbit crew poses at the opening bell ceremony as a 70 foot model rocket with satellites is placed in front of the NASDAQ in Times Square of New York City, United States on January 7, 2022.
Tayfun Coskun | Anadolu Agency | Getty Images
Not too long ago, Virgin Orbit was in rarified air among U.S. rocket builders, and executives were in New York celebrating its public stock debut.
The scene was true to the marketing pizazz that has helped Sir Richard Branson build his Virgin empire of companies, showcasing with a rocket model in the middle of Times Square.
The deal, facilitated by a so-called blank check company, gave Virgin Orbit a valuation of nearly $4 billion. But that moment in December 2021 – when the craze surrounding public offerings centered on special purpose acquisition companies, or SPACs, was dying out – previewed the pain to come.
Now, Virgin Orbit is on the brink of bankruptcy. The company on Thursday halted operations and laid off nearly all of its staff. Its stock was trading around 20 cents Friday, leaving it with a market value of about $74 million.
When Virgin Orbit closed its SPAC deal, it raised less than half of the nearly $500 million expected due to high shareholder redemptions, shortening its runway. With the broader markets turning against riskier yet-unprofitable assets like many new space stocks, Virgin Orbit shares began a steady slide, further limiting its ability to raise substantial outside investment.
Branson, Virgin Orbit’s largest stakeholder, was unwilling to fund the company further, as CNBC previously reported. Instead, he began hedging against his 75% equity stake through a series of debt rounds. That debt gives the flashy British billionaire first priority of Virgin Orbit assets in the event of the now-impending bankruptcy.
While Virgin Orbit touted a flexible and alternative approach to launch small satellites, the company was unable to reach the rate of launches necessary to generate the revenue it sorely needed.
Virgin Orbit’s technical staff acquitted themselves well over the company’s brief existence, but were ultimately undone in by its leaders’ financial mismanagement. It’s a story too often told in the history of the space industry: Exciting, or even innovative, technologies do not necessarily equal great businesses.
It became one of a few U.S. rocket companies to successfully reach orbit with a privately developed launch vehicle. It launched six missions since 2020 — with four successes and two failures — through an ambitious and technically difficult process known as “air launch,” with a system that uses a modified 747 jet to drop a rocket mid-flight and send small satellites into space.
But Virgin Orbit had dug a nearly $1 billion hole, flying missions just twice a year while its payroll expenses climbed. The company’s leadership was aware of the deteriorating situation and lack of progress, and even considered changes last summer to make the business more lean. But no clear or dramatic plan came to fruition – leading to Thursday’s fall.
This story collects insights from CNBC’s discussions with company insiders and industry investors over the past several weeks, as well as from regulatory disclosures, to explain where things went wrong for Virgin Orbit. Those people asked to remain anonymous in order to discuss internal or competitive matters.
A Virgin Orbit spokesperson declined to comment for this story.
The company’s 747 jet “Cosmic Girl” releases a LauncherOne rocket in mid-air for the first time during a drop test in July 2019.
Greg Robinson / Virgin Orbit
Virgin Orbit was spun-off from Branson’s space tourism company, Virgin Galactic, in 2017, after a team within the latter sister company saw potential in using an aircraft as a platform to launch satellites. While “air launching” satellites was not a novel idea to Virgin Orbit, the company aimed to surpass the air-launched Pegasus rocket – developed by Orbital Sciences, which is now owned by Northrop Grumman –for a fraction of the cost per mission.
Headquartered in Long Beach, California, Virgin Orbit flew most of its missions out of the Mojave Air and Space Port. The exception to that was its most recent launch, which took off from Spaceport Cornwall in the United Kingdom. Virgin Orbit had been working with other governments to provide launches by flying out of airports around the world, signing agreements with Japan, Brazil, Australia and the island of Guam.
The advertised flexibility and potential of Virgin Orbit’s approach attracted quite a bit of attention from leaders in the U.S. national security community. Following meetings with top Pentagon brass in 2019, Branson proclaimed that Virgin Orbit is “about the only company in the world that could replace [satellites] in 24 hours” during a military conflict.
At the time, the Air Force’s acquisition lead, Will Roper, said he was “very excited about small launch” after meeting with Branson. He said the U.S. military had “huge money to invest” in buying rocket launches.
The company had hoped to launch its debut mission as early as 2018, but that goal kept moving every six months or so. Eventually, Virgin Orbit launched its first mission in May 2020, which failed shortly after the rocket was released from the jet. It got to orbit successfully for the first time in January 2021.
Given the company’s burn rate near $50 million a quarter, Virgin Orbit was targeting profitability once it got beyond a launch rate, or cadence, of a dozen missions per year. When it went public, Virgin Orbit CEO Dan Hart told CNBC that the company was aiming to launch seven rockets in 2022, to build on that momentum.
At the same time, Virgin Orbit was already in a deep financial hole – with a total deficit of $821 million at the end of 2021, due to steady losses since its inception. While Virgin Orbit had aimed to launch seven missions last year, that number was steadily guided down quarter after quarter, closing out 2022 with just two completed lunches – the same as the year before.
Some people within the company who had been critical of Virgin Orbit’s execution pointed to several executives’ backgrounds at Boeing, which has had its share of space-related snags over the years.
Virgin Orbit CEO Dan Hart had spent 34 years at Boeing, where he was previously the vice president of its government space systems. COO Tony Gingiss joined Virgin Orbit from satellite broadband company OneWeb, but before that had spent 14 years in Boeing’s satellite division. And Chief Strategy Officer Jim Simpson had also spent more than eight years in Boeing’s satellite division before joining Virgin Orbit.
As one person emphasized, the company launched the same amount of rockets in a year with a staff of 500 as it did with a workforce of over 750 people. Others complained of a lack of cross-department coordination, with projects and spending done in silo of each other – leading to a disconnect in schedules.
Two people mentioned wastefulness in ordering materials. For example: The company would buy enough expensive items with limited shelf-life to build a dozen or more rockets, but then only build two, meaning it would have to throw away millions of dollars’ worth of raw materials away.
When Virgin Orbit announced an employee furlough March 15, people familiar with the situation said the company had about half a dozen rockets in various states of production in its Long Beach factory.
As the lack of a financial lifeline made the situation increasingly more desperate, multiple Virgin Orbit employees voiced frustration with how Hart communicated the company’s position – and even more so with the lack of clarity after the furlough.
The day of the initial pause in operations, people described company leadership running around frantically while many employees stood around waiting for word on what was happening. One person emphasized the tumultuous and sudden furlough happened because executives tried to keep the company alive as long as possible. Several employees expressed disappointment with Hart holding the March 15 all-hands meeting virtually, speaking from his office rather than face-to-face, and not taking any questions after announcing the pause in operations.
That frustration continued after the pause, with employees confused by the lack of specifics about which investors were speaking to Virgin Orbit leadership. Thursday’s update that a deal fell through came as little surprise to a workforce that was largely in limbo. Many were already hunting for new jobs.
Deal efforts fall apart
The rocket for the company’s second demonstration mission undergoing final assembly at its factory in Long Beach, California.
A pivot in Virgin Orbit’s strategy became apparent and necessary shortly after it went public.
Virgin Orbit aimed to raise $483 million through its SPAC process, but significant redemptions meant it raised less than half of that, bringing in $228 million in gross proceeds. The funds it did raise came from the minority of SPAC shareholders who stuck around, as well as private investments from Virgin Group, the Emirati sovereign wealth fund Mubadala, Boeing, and AE Industrial Partners.
Unlike its sister company Virgin Galactic, which built its cash reserves to more than $1 billion through stock and debt sales after going public in October 2019, Virgin Orbit did not build its cash coffers. And that meant leadership should have buckled down and made changes to run the company in a more lean way, one person emphasized, to rebuild momentum.
And then Virgin Orbit’s apparent strength in the national security sector began to falter. Despite half of its missions flying Space Force satellites, the company lost out to competitor Firefly Aerospace for a launch contract under the “Tactically Responsive Space” program. Awarded in October, the mission seemed right up Virgin Orbit’s alley, especially since the prior mission under that Space Force program flew on the similarly air-launched Pegasus rocket.
As the financial situation worsened, a few bankers who spoke to CNBC wondered why the search for a deal was dragging on. According to one banker, Virgin Orbit could raise anywhere from $10 million to $15 million quickly to stop-gap the situation while it found a larger buyer. Another investor estimated that Virgin Orbit had about $270 million in net tangible assets, further sweetening the potential for a wholesale deal even despite its plunging market value.
A white knight seemed to appear last week in the form of Matthew Brown, who discussed making an 11th-hour deal with Virgin Orbit, to reportedly inject as much as $200 million into the company. However, within days, the talks fell apart. The company continued to discussions with another, unnamed investor this past week.
But in the words of Hart on Thursday, Virgin Orbit was “not been able to secure the funding to provide a clear path for this company.”
And while the 675 employees laid off Thursday likely have strong job prospects, Virgin Orbit seems now destined for bankruptcy.
Disney CEO Bob Iger rips Ron DeSantis over ‘anti-Florida’ retaliation
Bob Iger, CEO, Disney, during CNBC interview, Feb. 9, 2023.
Randy Shropshire | CNBC
Bob Iger on Monday called Florida Gov. Ron DeSantis’ actions against The Walt Disney Co. retaliatory, “anti-business” and “anti-Florida.”
The feud between DeSantis and the company escalated earlier Monday, when the governor asked the state’s inspector general to determine whether the House of Mouse’s sly move to retain control over the outer limits of Orange and Osceola counties is legal – and whether any of the company’s executives were involved in the scheme.
During the company’s annual shareholder meeting Monday, Disney CEO Iger addressed investor inquiries about the ongoing dispute between the company and Florida legislators. He noted that Disney has more than 75,000 employees in the state, and has created thousands of indirect jobs, as well as brings around 50 million visitors to Florida every year and is the state’s largest taxpayer
“A year ago, the company took a position on pending Florida legislation,” Iger said, apparently referring to what critics called the “Don’t Say Gay” bill. “And while the company may have not handled the position that it took very well, a company has a right to freedom of speech just like individuals do.”
He added: “The governor got very angry about the position Disney took and seems like he’s decided to retaliate against us, including the naming of a new board to oversee the property and the business. In effect, to seek to punish a company for its exercise of a constitutional right. And that just seems really wrong to me.”
Iger said Disney plans to spend more than $17 billion in investments at Walt Disney World over the next decade, which would create around 13,000 jobs at the company and generate even more taxes for Florida.
“Our point on this is that any action that supports those efforts simply to retaliate for a position the company took sounds not just anti-business, but it sounds anti-Florida,” he said. “And I’ll just leave it at that.”
Last week, DeSantis’ newly appointed board of the Reedy Creek district, now named the Central Florida Tourism Oversight District, revealed that the previous Disney-allied board signed a long-lasting agreement that drastically limits the control that can be exercised over the company and its district.
Florida Governor Ron DeSantis speaks during ‘The Florida Blueprint’ event on Long Island, New York, United States on April 1, 2023. Ron DeSantis made comments on the Grand Jury’s indictment of Donald J. Trump, 45th President of the United States in Manhattan, New York.
Kyle Mazza | Anadolu Agency | Getty Images
The agreement was signed on Feb. 8, the day before the Florida House voted to put DeSantis in charge. DeSantis replaced all of the Disney-allied board members with five Republicans on Feb. 27. It was only then that Disney’s new binding agreement was discovered.
The agreement includes a clause that dates back to 1692 in Britain. The “Declaration shall continue in effect until 21 years after the death of the last survivor of the descendants of King Charles III, King of England, living as of the date of this declaration,” the document said.
The governor’s letter calls the board’s agreement an attempt to “usurp the authority of the CFTOD board” and “nullify the recently passed legislation, undercut Florida’s legislative process, and defy the will of Floridians.”
He said at the agreement also has “legal infirmities” including inadequate notice, improper delegation of authority and ethical violations.
Disney, however, has said that all of the board’s maneuvers were completely legal — the agreement was discussed and approved in open, noticed public forums, in compliance with Florida’s Sunshine law.
The development in DeSantis’ conflict with Disney marks just the latest move in one of several partisan battles being waged by the Republican governor.
DeSantis is widely believed to be laying the groundwork to launch a 2024 presidential campaign. That move is expected to come not long after the current Florida legislative session ends in early May. Polls show that DeSantis is the most competitive of the potential opponents for former President Donald Trump in a GOP primary.
The Florida governor took aim at Disney after the company publicly balked at Florida’s HB 1557 law early last year. HB 1557, which critics called the “Don’t Say Gay” bill, limits early education teachings on sexual orientation or gender identity.
Republican state Rep. Randy Fine told CNBC’s “Squawk Box” last April that the bill dissolving Reedy Creek wasn’t retaliatory, but then said “when Disney kicked the hornet’s nest, we looked at special districts.”
Until recently, there had been no major public discussion about dissolving Disney’s long-established special district, which it’s occupied for 55 years, leading DeSantis’ critics to question its timing and the speed at which the governor acted against the company.
The fight between DeSantis and Disney shows no signs of slowing down. During a book tour stop in Georgia last week, DeSantis told attendees “You ain’t seen nothing yet.”
WWE near deal to be sold to UFC parent Endeavor, sources say
World Wrestling Entertainment Inc. Chairman Vince McMahon appears in the ring during the WWE Monday Night Raw show at the Thomas & Mack Center August 24, 2009 in Las Vegas, Nevada.
Ethan Miller | Getty Images
Vince McMahon’s World Wrestling Entertainment is in advanced talks to be sold to Ari Emanuel’s Endeavor Group, the parent company of UFC, according to people familiar with the matter.
A deal could be announced as soon as Monday. UFC and WWE are expected to form a new publicly traded company as part of the agreement, according to the people, who declined to be named due to the confidential nature of the discussions.
Endeavor is slated to own 51% of the new combat sports and entertainment company, while WWE shareholders would get 49%, according to the people. The Endeavor deal gives WWE an enterprise value of $9.3 billion, they said.
Emanuel is expected to act as chief executive of both Endeavor and the new company. McMahon, likewise, is expected to be executive chairman, while Endeavor President Mark Shapiro will also work in the same role at the new company. Dana White will remain as president of UFC, while WWE CEO Nick Khan will serve as president of the wrestling business.
The development comes during the same weekend WWE hosts its flagship live event, WrestleMania, in California. The company has spent the past several months looking for a buyer. McMahon returned to the company as chairman in January to oversee the process. Shares of WWE are up more than 33% so far this year, giving it a market value of more than $6.79 billion.
The deal will effectively end WWE’s decades-old status as a family-run business. McMahon’s father founded WWE in its original incarnation during the middle of the 20th century, and McMahon is the controlling shareholder in the company. McMahon bought the company from his father in 1982. Since then, the company has grown into a global phenomenon, spawing stars suck as Hulk Hogan, Dwayne “The Rock” Johnson, Dave Bautista and John Cena.
McMahon, 77, retired from the company in July following a string of revelations that he paid several women millions of dollars over the years to keep them quiet about alleged affairs and misconduct. His daughter, Stephanie McMahon, became co-CEO alongside Khan. Paul Levesque, who’s both Stephanie McMahon’s husband and the wrestler known as Triple H, took over creative duties from Vince McMahon.
When Vince McMahon came back in January, Stephanie McMahon stepped down and Khan fully assumed the CEO role. The elder McMahon recently locked in a two-year employment contract, according to a securities filing.
Khan in recent weeks has been making the media rounds to discuss the potential sale. He told CNBC’s Morgan Brennan on Thursday that it’s been a robust sale process, drawing many interested buyers.
WWE brings with it a robust media and live events business, along with its decades worth of intellectual property. The company generated $1.29 billion in revenue last year, driven mainly by its $1 billion media unit.
UFC has paid off for Endeavor. Last year, the MMA league helped Endeavor’s sports business make $1.3 billion in revenue. Endeavor’s market cap stood at about $10.53 billion as of Friday’s close. The Endeavor-WWE deal values UFC at more than $12 billion.
WWE, at least at a glance, would also fit well with the cultures at Endeavor and UFC. McMahon has a brash public persona, making him an apparently good match for Emanuel and White, who are also known for their outsized personalities.
White, like McMahon, is no stranger to scandal, either. Earlier this year, video emerged showing the UFC boss slapping his wife during a public argument at a New Year’s Eve party in Mexico. White apologized.
Disclosure: Peacock, the streaming service owned by CNBC parent NBCUniversal, carries WWE events such as WrestleMania.
Judge rejects Fox motions, allows Dominion’s $1.6 billion defamation suit to go to trial
A Delaware judge on Friday said Dominion Voting’s $1.6 billion defamation lawsuit against Fox Corp. and its networks could go to trial in April.
Judge Eric Davis of Delaware’s Superior Court rejected Fox’s arguments that it should bypass a trial since it’s protected by the First Amendment. The judge granted some of the voting machine maker’s motions, with the exception of its argument that Fox and its hosts acted with malice in broadcasting false claims about the 2020 presidential election between Donald Trump and Joe Biden.
The ruling comes more than a week after Fox and Dominion’s attorneys met before Davis over two days in Delaware, urging him to make a ruling rather than go to trial with jury in mid-April.
“We are gratified by the Court’s thorough ruling soundly rejecting all of Fox’s arguments and defenses, and finding as a matter of law that their statements about Dominion are false. We look forward to going to trial,” Dominion said late Friday afternoon.
Fox also weighed in on the judge’s ruling.
“This case is and always has been about the First Amendment protections of the media’s absolute right to cover the news. FOX will continue to fiercely advocate for the rights of free speech and a free press as we move into the next phase of these proceedings,” the company said.
Dominion brought its lawsuit against Fox News and Fox Business, as well as their parent Fox Corp., in 2021, arguing the channels and their hosts pushed false claims that its voting machines were rigged in the 2020 election that saw Biden triumph over Trump. The former president, who was indicted Thursday in an unrelated criminal matter, has repeatedly made false claims about the election being rigged against him.
Last year, as part of Dominion’s evidence gathering, the company deposed executives at both Fox Corp. — including Chairman Rupert Murdoch and his son and Fox CEO Lachlan Murdoch — and Fox News, as well as the top hosts on the network. In recent weeks, a trove of evidence has been released as part of the case, showing the hosts, as well as Rupert Murdoch, were skeptical of the election fraud claims being made on air.
Dominion has argued Fox defamed the company, affecting its business, and acted with malice. Fox has argued it was reporting on newsworthy allegations, at the time stemming from Trump and attorneys, and is protected by the First Amendment.
The judge pointed to the statements regarding election fraud, that Dominion manipulated vote counts through software and algorithms, that it was founded in Venezuela to rig elections on behalf of late dictator Hugo Chavez, and that it paid kickbacks to government officials who used the machines in the election – all of which were said on air on Fox – to be defamatory.
“The statements also seem to charge Dominion with the serious crime of election fraud. Accusations of criminal activity, even in the form of opinion, are not constitutionally protected,” Davis said in court papers.
While the judge on Friday granted summary judgement on some of Dominion’s arguments, including defamation, he didn’t grant one on actual malice.
In order to win a defamation case, a plaintiff needs to prove that the individual or business they are suing knowingly made false statements that caused harm, and that it acted with “actual malice,” meaning the speaker knew or should have known what they were saying to be untrue.
In the evidence released in recent weeks, internal text messages and emails between Fox executives and its hosts have shown they were skeptical of the claims being made on air. Still, Dominion argues, Fox continued to host guests such as Trump attorneys Rudy Giuliani and Sidney Powell, who repeated erroneous claims of election fraud.
Fox argued last week in court that the basis of its case was “whether the press accurately reports the allegations, not whether the underlying allegations are true or false.” Attorneys have built the media company’s case around the notion that “any reasonable viewer” of the news would be able to discern what was allegations or facts on Fox’s networks.
In Friday’s opinion, Davis, the judge, aid there was “no clear and convincing evidence of actual malice.” Instead, Davis said it is a matter a jury should decide.
Similarly, on Fox’s arguments against the $1.6 billion in damages Dominion is seeking in this case, Davis said the matter is for a jury to decide – including the calculation of how much the damages should be.
The trial, which is expected to last for weeks, is set to begin on April 17, with a pre-trial conference and jury selection taking place the week before.
Dominion is requesting Fox’s top hosts, including Tucker Carlson, Sean Hannity, Maria Bartiromo and Jeanine Pirro, as well as former host Lou Dobbs and Fox News CEO Suzanne Scott, appear on the stand for questioning. The depositions of both Murdochs, as well as other Fox Corp. executives, are to be included in the trial, too.
Former Fox producer Abby Grossberg was also added to Dominion’s witness list. Grossberg, who worked on the shows of Bartiromo and Carlson, filed a lawsuit against Fox alleging she was coerced into providing misleading testimony as part of the Dominion lawsuit.
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