What happened

What would have been a historic launch attempted by Virgin Orbit (VORB) this week ended in failure, and investors are wondering how many more attempts the Richard Branson-backed space stock can afford. The crash caused Virgin Orbit shares to go in a free fall, down as much as 26.5% for the week, according to data provided by S&P Global Market Intelligence.

So what

Virgin Orbit is the lesser known of two space start-ups spawned out of Branson's Virgin Group. Virgin Galactic, which is attempting to ferry tourists into space, has dealt with its own questions about viability. Now, coming off of this failure, Virgin Orbit is in the spotlight for all the wrong reasons.

This week's planned launch of a number of small satellites was to be the first from European soil and was watched by an estimated 75,000 viewers on the company's live stream. The initial phase of the launch seemed to go as planned, but the company said:

at some point during the firing of the rocket's second stage engine and with the rocket travelling at a speed of more than 11,000 miles per hour, the system experienced an anomaly, ending the mission prematurely.

In a follow-up statement, Virgin Orbit said that the mission reached space but failed to achieve orbit as the result of a premature shutdown of the second-stage engine.

Now what

As we've said before, space is hard. No company has ever reached orbit without a lot of trial and error, and when things go wrong, they tend to go wrong in spectacular fashion. Virgin Orbit has had previous success launching satellites into orbit. There is no reason to believe the company can't learn from this experience and build off of it.

But there are questions about the company's financials. Through the first nine months of 2022, Virgin Orbit recorded a net loss of $139 million on $33 million in revenue. With the company having just $71.2 million in cash on hand as of Sept. 30, it needs successful launches and cash coming through the door to be a sustainable business.

Branson invested an additional $25 million in November and $20 million in December, with the most recent funding backed by nearly all of the company's assets. That should buy Virgin Orbit some time, but it also will make it harder for the company to secure additional loans because there is little left to use as collateral.

Meanwhile, the small satellite launch market is one of the most competitive in all of aerospace, and rivals including Rocket Lab USA appear to be ahead of Virgin Orbit in terms of reliably reaching space.

If Virgin Orbit is to be a success, it needs positive results, quickly. It's too soon to give up on the company completely, but investors buying in today should make sure that Virgin Orbit is a small part of a well-diversified portfolio.