Why Virgin Orbit Stock Crashed 30% Today

What happened

Small rocket launcher Virgin Orbit Holdings (VORB +0.00%) imploded on Thursday. The troubled space stock crashed 31.7% through 11:20 a.m. ET after announcing it's putting essentially all of its workers on unpaid leave.

And I hate to say I told you so -- but I really did tell you so.

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OTC: VORB

Virgin Orbit

Today's Change

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Current Price

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Key Data Points

So what

With the company still reeling from news of a failed rocket launch in January (its second failure out of six total launches), cash reserves dwindling, and its cash flow statement a flaming furnace of cash burn ($233 million consumed over the past year), I warned investors in February that Virgin Orbit was on its last legs and that "absent an inflow of cash, or revenue from some successful rocket launches, the company might not survive another year."

Now it's possible Virgin Orbit might not survive the quarter.

Last night, Virgin Orbit announced it is furloughing its workers and suspending operations for a week as it seeks a cash injection to keep the doors open and the lights on. Virgin Orbit described its actions as taking an "operational pause," as it seeks new funds.

Now what

Three guesses whom Virgin Orbit will be hitting up for the cash.

Over the last six months, Virgin Orbit founder Richard Branson has anted up $55 million in financing to keep the company running, CNBC reports. Problem is, over those same six months, cash burn at the company has been probably twice that amount -- the financial equivalent of taking one step forward, then two steps back.  

Now the question is whether Branson has enough confidence in the company -- and in its ability to find and fix what went wrong with the last rocket launch, and to then resume rocket launches and make enough money to earn a profit -- to justify pouring more money into this money-losing venture.

Unless he decides in the affirmative, insolvency is a real option. While Branson himself may step in to scoop up the assets and try again, outside shareholders in Virgin Orbit should brace for impact -- and a possible total loss of their investment.