Six years ago, Virgin Orbit's future seemed bright.
The fledgling rocket company had been spun off British billionaire Richard Branson's space tourism firm, Virgin Galactic, to take advantage of the burgeoning small-satellite launch market. There appeared to be plenty of business and plenty of money, especially with Branson's backing.
But in the last few months, behind the scenes, the Long Beach company was struggling to keep afloat.
On Tuesday, after weeks of desperate attempts to find additional funding, Virgin Orbit filed for Chapter 11 bankruptcy protection. The company's unique air-launched rocket system is up for grabs to the highest bidder, and most of Virgin Orbit's nearly 700 employees have been laid off.
"We saw this coming. They had been struggling financially for quite some time," said Laura Forczyk, executive director of space consulting firm Astralytical. "What surprised me is how quickly it happened."
Virgin Orbit had been "actively seeking capital" since October, according to a notice the company filed last week with the state Employment Development Department. But its financial woes date back much further.
The company had merged with a special purpose acquisition company, or SPAC, to go public in January 2022. But in the run-up, Virgin Orbit raised just $228 million of the $483 million it expected to bring in from the merger, leaving the newly public company with an immediate shortfall.
Meanwhile, employees were hard at work getting the company's rockets ready for launch.
Virgin Orbit occupied part of a sprawling complex in Long Beach with rich aerospace history. The entire property was once a World War II airplane manufacturing plant, where tens of thousands of people worked on planes such as the MD-80 jetliner and the B-17 bomber. Later, the site was used to build C-17 Globemaster III cargo planes.
As Virgin Orbit grew, it filled out its rocket factory. Once empty enough for pickup basketball games, the building began to fill with machinery, rocket parts and workers. The company launched its first demonstration mission in 2020, showcasing its unique air-launch rocket system.
Virgin Orbit launches rockets from beneath the wing of a modified Boeing 747 jetliner. The idea was that the company could launch from anywhere in the world with a runway, rather than being limited to locations with a launch pad.
In that way, the company could fill its launch manifest with more customers and could, in theory, launch satellites on its customers' timelines without getting in line and waiting for an opening at an established launch site.
In fact, Virgin Orbit's last mission in January was a launch of nine satellites from a British coastal town that, until weeks before liftoff, had only a concrete slab at its spaceport. That mission failed due to a problem with the rocket's upper stage, resulting in the loss of the satellites.
The failure did not help Virgin Orbit's financial troubles. If the launch had been successful, the company probably could have gotten more support from government customers or investors, Forczyk said. But with rising interest rates and fears of a recession, investors were more reluctant to back technology companies that were not a sure-fire win.
"It really was the catalyst," she said. "It's a fickle environment when it comes to investors right now. Right now is a tough environment for startup space companies."
In the months before the bankruptcy filing, the company began tightening its belt, spending less money on programs outside the next few rockets in production. The stock price had started to slide and by mid-March, Virgin Orbit hit pause on its operations and furloughed most of its employees as executives tried to secure additional funding.
Last-minute talks with an investor fell apart and, by Monday, the company had laid off about 85% of its workforce, including its chief operating officer. Most of the affected employees were based in Long Beach or Mojave.
Virgin Orbit said Tuesday that it secured $31.6 million in debtor-in-possession financing from Branson's Virgin Investments to fund the Chapter 11 process. Although having a billionaire backer once seemed like a godsend for space companies, Virgin Orbit's story could prove a cautionary tale. Branson's funding was not unlimited, and even his space tourism company Virgin Galactic is facing financial head winds.
Shares of Virgin Galactic Holdings closed Tuesday at $3.43, down 11.6%.
"We believe that the cutting-edge launch technology that this team has created will have wide appeal to buyers as we continue in the process to sell the company," Virgin Orbit Chief Executive Dan Hart said in a statement.
Finding a buyer for the company in bankruptcy could be a daunting task. Some commercial space companies have reemerged under new ownership after Chapter 11 proceedings, but it is unlikely that Virgin Orbit will do so, Forczyk said.
"At this point, I don't see interest in bringing back Virgin Orbit," she said. "I do predict there will be interest in the hardware and IP assets."
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