The rise and fall of Virgin Orbit and the failed US rocket launch

This article headline may lead you to believe the US aerospace giant had seen meteoric commercial success followed by an almighty crash. In reality the company’s only real rise was the ascent to 180km of its Launcher One rocket before hurtling back to earth following a significant technical failure. So, the question is “Why is the UK government hailing the latest Virgin Orbit mission a success?”. The answer is easy, and it follows the principles of the age old fable, The Emperor’s New Clothes.

Because the British government is so heavily invested in Richard Branson’s latest project, it requires the general public to see that it is backing a winning formula. Much the same as when Boris Johnson’s government invested $500 million of taxpayers’ money on the OneWeb satellite constellation thinking it was buying a GPS satellite network. Only to discover the satellites weren’t suitable for GPS use and to retro-fit the constellation already in orbit was an incredibly difficult and extremely expensive exercise… near impossible in fact.

TwoWeb?

So, when a government minister appears on National TV and tells you that the latest space project that has their full backing was a complete success, we would strongly advise you to check for yourself whether the Launcher One rocket was indeed fully clothed or whether you were staring at a bare naked mistruth.

What still remains a complete mystery is why the UK government put all their weight behind this experimental and risky endeavour and maybe more importantly, whether they did any due diligence on the commercial outfit (I refer back to the OneWeb “GPS” satellite network acquisition for a historic due diligence example).

Let’s do some due diligence on Virgin Orbit

One of the most important aspects of due diligence is to ensure the company you are backing has the finances for continued operation and then whether it has the expertise to execute its business plans. To help us on our way, let’s take a look at a Press Release sent out by Spaceport Cornwall announcing the UK government’s support for the project…

The first thing to highlight here is that since this announcement the funding was approved. And according to Virgin Orbit’s own website, they have had at least £7.35m funding approved.

A closer look at the Virgin Orbit announcement above (from 2019) reveals in the first paragraph that this funding is specifically for Virgin Orbit UK Ltd., (the UK branch of Sir Richard Branson’s satellite launch company… their words, not ours).

Virgin Orbit UK’s books make for a short read

It’s time to delve into Virgin Orbit UK Ltd. accounts. And let us also take into account that the failed rocket had 9 satellites onboard for paying clients, so we would expect those to have either paid in advance or at least show as “pending income”. We would also expect to see the £7.35m in an entry somewhere within the accounts.

Now this isn’t what we expected to see. That is a hell of a lot of zeros. A company with £0 turnover, £0 expenses £0 profit receiving taxpayer funding and where is the revenue from those 9 satellites?

OK, so it’s understandable that the company isn’t necessarily into profit yet and also that there is a strong chance that no revenue has actually arrived into their books yet. But £0 expenses is quite an incredible stand out here. It’s almost as if they don’t even really exist, or at the very least they simply do not have an operation here on UK soil. Making the whole exercise look like an elaborate mirage.

150 new jobs

We already know that their Launcher One rockets are manufactured in California, USA – because they said so themselves. So, we wouldn’t expect to see any manufacturing costs incurred here. But, we do remember that Spaceport Cornwall press release that said there COULD be 150 jobs created. And now that the Spaceport is in full operational mode, let’s have a look at how many employees Virgin Orbit UK Ltd. have in the UK.

Zero! Wait! Surely this is an administrative error. There has to be at least one person working either in the UK or for the UK-entity. Maybe we can have a look at the Directors.

Well we didn’t expect that. All 3 Directors are resident in the USA and are American citizens. But there is one more name showing on Companies House.

Ah, now here we go. Sir Richard Branson, who, according to Companies House, controls over 75% of controlling shares, is at least a British Citizen (although his correspondence address is within the offshore tax haven of the British Virgin Islands).

And then, Virgin Orbit Holdings

As the saying goes… “follow the money”. And in this case there is none. But we do know that there is a US entity by the name of Virgin Orbit Holdings Inc. Maybe they have shouldered the burden of costs and are in a stronger financial position to have passed the UK Space Agency & UK Government due diligence process leading to the allocation of grants.

It looks like the share price has totally tanked in the last 12 months, going from $10.24 to $1.66 (a drop of around 86%). But, of course, share price isn’t necessarily a sign of a company’s profitability or good standing. It can, however, indicate what investors think of the business model and its likeliness to provide them a financial return on their investment. A more accurate picture can usually be seen from closer scrutiny of the financial accounts published by the company, so let’s have a look…

This is worse than we thought. $141m operating expense to generate $7.3m in revenue in 2021 (a figure that is coincidentally close to the £7.35m awarded in grants by the UK govt. But we are sure this is unrelated) resulting in an overall negative figure of -£171m of operating income. And the picture for previous years is considerably worse with -$179m and -$192m in 2020 and 2019 respectively.

Summary

Firstly, let’s be very clear that the launch of an American rocket containing satellites from the UK was not launched from the UK at all, but took place just off the coast of Ireland. The American aeroplane that carried the rocket to its launch has now returned to its home in California.

The UK entity that was heavily supported by the UK government, Virgin Orbit UK Ltd., and given a grant by government agency, UK Space Agency, has shown no revenues to date and definitely no taxable income that would have a economic benefit to the country. The company also has no employees in the UK and the suggestion of 150 jobs being created has no obvious sign of ever transpiring any time soon. In fact the Technology Safeguards Agreement (TSA) between UK and USA expressly forbids non-Americans from handling US-manufactured space technology while on UK soil for launch.

It is also evident that the most recent launch was an abject failure and for the UK government and Virgin Orbit’s American team to claim otherwise is quite an astonishing exercise in gaslighting, making huge assumptions that the general public are a gullible bunch who do not care how their taxes are spent.

One thing they underestimated though. Whilst the British Government have fell hook, line and sinker for their ruse (or are complicit partners in the deception) the share price of the US entity and share trading volume is a clear sign that US and International investors are very switched on.