Richard Branson’s struggling satellite launch company, Virgin Orbit Holdings Inc, is close to securing a $200 million investment from Texas-based venture capital investor, Matthew Brown, through a private share placement.
If successful, the deal would provide a significant confidence boost for Virgin Orbit, which has seen its market capitalization plummet to a record low of $150 million from over $3 billion two years ago when it went public through a blank-check deal.
Virgin Orbit has been struggling with dwindling cash reserves and mounting losses in recent quarters, as space startups face fierce competition in the rocket launch market. In January, its rocket, LauncherOne, failed in its mission to deploy nine small satellites into lower Earth orbit due to an anomaly during its flight.
Virgin Orbit received about $35 million in capital injections from Branson’s Virgin Investments in recent months. It announced last week that it was exploring strategic options and in talks for fresh funding after a cash crunch forced it to halt operations and furlough almost all of its staff.
Virgin Orbit and Matthew Brown are looking to finalize the deal on Friday, as per the term sheet, which is not binding and subject to final agreement. Virgin Orbit was not available for comment, while Matthew Brown Companies did not respond to the request for comment.
According to a source with direct knowledge of the matter, Virgin Orbit’s board approved the deal at a meeting on Tuesday. The agreement will allow Matthew Brown to convert his $200 million investment in Virgin Orbit’s preferred shares into common shares at the volume weighted average price in the 30 days before the deal is signed. The converted shares will possess the same voting rights as the common stock, with Virgin Investments currently holding nearly 75% stake as the largest shareholder.
The company reported a loss of nearly $44 million for the third quarter and had cash reserves of about $71 million at the time, a significant decrease from $122 million as of June-end. It has yet to announce a date for its fourth-quarter results.
In related news, Reuters reported on Tuesday that Virgin Orbit plans to recall a small team from furlough on Thursday to work on rocket upgrades.