News of halting operations, failed funding and job cuts did not sit well with shareholders as Virgin Orbit saw its shares plunge 50% following the announcement.
Aircraft engineering company Virgin Orbit Holdings Inc (NASDAQ:VORB) has disclosed plans to cease operations after failing to secure a funding lifeline as expected. The company’s CEO Dan Hart broke the unfortunate news to employees on Thursday and said there would be mass layoffs. Before the move to halt operations, there was word on the street that Virgin Orbit was expecting $200 million investment From venture capital investor Matthew Brown. Reuter cited a term sheet indicating the company was nearing a deal with an investor through a private share placement.
Virgin Orbit halts operations amid financial crisis
This news came to light when Virgin Orbit was on the verge of bankruptcy. Therefore, the required capital was vital for the survival of the company as it is in the most challenging financial mess since its inception. The firm reported a loss of approximately $44 million in the third quarter. During the same period, its cash reserves fell from $122 million to $71 million. In addition to the expected investment from Brown, there were rumors that Virgin Orbit was in discussions with two restructuring firms for financing. The said firms are Ducera and Alvarez & Marsal (A&M).
However, all efforts to secure a funding lifeline have proved abortive for Virgin Orbit, which has resorted to ceasing all operations. The CEO revealed that the company was unable to secure funding that would have provided “a clear path out” from the current financial situation. During a face-to-face meeting, he explained that Virgin Orbit was left with no choice but to cease operations and “implement immediate, dramatic and extremely painful changes”.
As a result of “painful changes”, Virgin Orbit is sacking almost all of its staff. The company will retrench all the posts except 100 posts. The company noted in a filing that the layoffs would affect 675 positions, or about 85%. With concern in his voice, Hart said:
“This company, this team – all of you – mean a lot to me. And I will not, and will not, stop supporting you, whether you’re here on the trip or if you’re somewhere else.
Virgin Orbit shares
The news of halting operations, failed funding and job cuts did not sit well with shareholders as Virgin Orbit saw its shares plunge 50% following the announcement. The company’s stock is currently trading at $0.17. The aircraft engineering company has lost more than 95% in the last twelve months.
To support departing workers as it halts operations, Virgin Orbit promises severance packages. At the same time, the CEO said that cash payments and benefits would expand. Hart noted providing a “direct pipeline” with the sister company. Virgin Galactic (NYSE: SPCE) to help victims of job cuts find new positions.
Ibukun is a crypto/finance writer interested in delivering relevant information using non-complicated words to reach all types of audiences. Apart from writing, she enjoys watching movies, cooking and exploring restaurants in the city of Lagos where she lives.
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