Virgin Orbit is ceasing operations “for the foreseeable future” after failing to secure a funding lifeline, CEO Dan Hart told employees during an all-hands meeting on Thursday afternoon, and will layoff about 90% of its workforce.
“Unfortunately we’ve not been able to secure the funding to provide a clear path for this company,” Hart said, according to audio of the 5 p.m. ET meeting obtained by CNBC.
“We have no choice but to implement immediate, dramatic, and extremely painful changes,” Hart said, audibly choking up on the call, adding that this would “probably the hardest all-hands that we’ve ever done in my life.”
The company will eliminate all but 100 positions, Hart noted, with the layoffs affecting “every” team and department. Virgin Orbit will “provide a severance package for every departing” employee, Hart said, with a cash payment, extension of benefits, and support in finding a new position – with a “direct pipeline” set up with sister company Virgin Galactic for hiring.
Hart has been giving the company’s employees brief daily updates since Monday, when Virgin Orbit last minute delayed a scheduled all-hands meeting to Thursday. Late-stage deal talks had fallen through with a pair of investors over the weekend, but Hart told staff on Monday that “very dynamic” investment discussions were continuing. Those investor discussions continued this week – with Hart saying leadership would share any updates “as quickly and transparently as we can,” noting that leaking emails “is against company policy,” according to copies of Hart’s emails from Tuesday and Wednesday obtained by CNBC.
The company this week has steadily been bringing back more of its over 750 employees from the operational pause and furlough it began on Mar. 15, after initially resuming some work with a “small team” on Mar. 22. Amid the broader pause, Virgin Orbit has been working to finish its investigation into the mid-flight failure of its previous launch, as well as finish preparations on its next rocket.
A Virgin Orbit representative did not immediately respond to CNBC’s request for comment.
Shareholders poured out of the stock in extended trading, with shares selling off nearly 30% after the announcement. Virgin Orbit stock closed at 34 cents a share on Thursday, having fallen 82% since the beginning of the year.
Virgin Orbit developed a system that uses a modified 747 jet to send satellites into space by dropping a rocket from under the aircraft’s wing mid-flight. But the company’s last mission suffered a mid-flight failure, with an issue during the launch causing the rocket to not reach orbit and crash into the ocean.
The company has been looking for new funds for several months, with majority owner Sir Richard Branson unwilling to fund the company further.
Virgin Orbit was spun out of Branson’s Virgin Galactic in 2017 and counts the billionaire as its largest stakeholder, with 75% ownership. Mubadala, the Emirati sovereign wealth fund, holds the second-largest stake in Virgin Orbit, at 18%.
The company hired bankruptcy firms to draw up contingency plans in the event it is unable to find a buyer or investor. Branson has first priority over Virgin Orbit’s assets, as the company raised $60 million in debt from the investment arm of Virgin Group.
On the same day that Hart told employees that Virgin Orbit was pausing operations, its board of directors approved a “golden parachute” severance plan for top executives, in case they are terminated “following a change in control” of the company.