Virgin Orbit is suspending operations and furloughing workers whereas it seeks funding

Richard Branson’s Virgin Orbit, with a rocket under the wings of a modified Boeing 747 jet, lifts off from Mojave, California on July 10, 2019 for a major drop test of its high-altitude satellite launch system.

Mike Blake | Reuters

Virgo Orbit is furloughing almost all of its employees and suspending operations for a week while it seeks a funding lifeline, people familiar with the matter told CNBC.

Virgin Orbit shares are down about 33% in after-hours trading from Wednesday’s close of $1.01 a share. The stock has fallen steadily since its debut of nearly $10 per share in December 2021.

Company executives briefed employees on the situation in an all-hands meeting Wednesday at 5 p.m. ET, according to meeting attendees. Leave is unpaid, although staff can redeem PTO with only a small team continuing to work. Virgin Orbit is also increasing the payroll by a week to Friday.

In All Hands, company leaders told employees they intend to provide an update on the furlough and funding situation by next Wednesday or Thursday, according to the people, who asked to remain anonymous to discuss internal matters.

A spokesman for Virgin Orbit confirmed in a statement to CNBC that the company is embarking on an “operational pause.” Virgin Orbit plans to “provide an update on continued operations in the coming weeks,” the spokesperson added.

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The rocket-making company has developed a system that uses a modified 747 jet to send satellites into space by dropping a rocket under the plane’s wing mid-flight. But the company’s latest mission suffered an in-flight failure, with a problem during launch causing the rocket to fail to reach orbit and crash into the ocean.

“Our investigation is almost complete and our next production rocket with the required modification is in the final stages of integration and testing,” Virgin Orbit spokesman said.

When Virgin Orbit reported its third-quarter results in early November, it reported cash on hand at the end of the quarter of $71.2 million. On earnings of $30.9 million, Virgin Orbit reported an Adjusted EBITDA loss of $42.9 million for the period as the company continues to burn cash.

Since the fourth quarter, the company has continued to borrow through an investment arm of Richard Branson’s Virgin Group. The Company raised $25 million in convertible unsecured notes in November before raising $20 million and $10 million in convertible senior secured notes in December and February, respectively. The debentures give Branson’s parent company “first priority” over Virgin Orbit’s assets.

As of Wednesday, the company was yet to announce when it would release fourth-quarter 2022 results.

Earlier this week, Virgin Orbit CEO Dan Hart canceled at the last moment a scheduled appearance on a panel during a space industry conference in Washington, DC, scheduled for Tuesday.