What happened
Space start-up Virgin Orbit Holdings (VORB) said it was ceasing operations for the "foreseeable future" after failing to secure funding. Investors believe the end is near, sending shares of Virgin Orbit down as much as 44% on Friday.
So what
Virgin Orbit is the lesser-known space start-up spun out of Richard Branson's Virgin Group. While Virgin Galactic continues to make slow progress toward ferrying tourists into space, Virgin Orbit is focused on launching small satellites into orbit.
But Virgin Orbit has struggled to make progress toward its goal. The company has dealt with a series of engineering setbacks, including a high-profile launch failure back in January, and earlier this month furloughed its workers while it sought a cash injection.
The search for cash apparently was not successful. In a regulatory filing, Virgin Orbit said it would lay off about 85% of workers and would cease operations due to a lack of funds.
CEO Dan Hart, on a call with workers, reportedly said, "We have no choice but to implement immediate, dramatic, and extremely painful changes" in response to the company's funding situation.
Now what
The company is not laying off everyone and shutting its doors. But investors should think twice before concluding that this drop is a buying opportunity.
Virgin Orbit has been trying for weeks to find a wealthy benefactor, with no luck. The most obvious choice, Richard Branson, appears to have moved on. And with several better-funded and to date more successful competitors, including SpaceX and Rocket Lab USA, it isn't obvious that Virgin Orbit's rocket would be a market winner even if funding was secured.
The bottom line is that there isn't a lot of reason for optimism for anyone involved with Virgin Orbit right now.
