Virgin Orbit’s SPAC list could put more than half of Branson’s fortune in unproven space startups

After building a multibillion dollar fortune from record stores, planes, trains, gyms and many other Virgin-branded businesses during his 50-year long commercial career, British billionaire Richard Branson may soon have more than half of his estimated fortune in two high-risk, unproven space startups.

Currently, around $ 2 billion of Branson’s estimated $ 5 billion net worth comes from his stake in Virgin Galactic, the space tourism company that went public in 2019. Reports It emerged last week that Virgin’s second space startup, Virgin Orbit, a small US and UK-based satellite launcher, was seeking to go public through a SPAC merger, seeking a valuation of around $ 3 billion. of dollars.

The listing would tip the scales on Branson’s wallet and further shift the fortune of an entrepreneur who has made billions building traditional businesses on the strength of the Virgin brand, into a very risky and expensive new industry.

For SPAC, still unconfirmed by the Branson team, Virgin Orbit is reportedly working with NextGen Acquisition II, a special purpose acquisition company founded by former Goldman Sachs banker George Mattson. It is not yet clear how much of its 80% stake in Virgin Orbit Branson would be lost in the SPAC merger. But if the deal reaches a value of $ 3 billion and he owns only 20% of it, for the first time, more than half of Branson’s net worth would be in two companies deviating from the book. games from Virgin, both based on new operating technology. in an uncertain market.

Likewise, Virgin Galactic is yet to meet its revenue targets and is far from making a profit, although Branson’s Unity spacecraft is certainly moving in the right direction towards regulatory approval.

Value in orbit?

Virgin Orbit is certainly a unique offering. The company launches its payloads under the wing of a 747 aircraft, and in January of this year, Virgin Orbit defied skeptics and put its first batch of customer satellites into low Earth orbit after an unsuccessful attempt in May 2020. The feat put Virgin Orbit among the likes of SpaceX and challenger Kiwi Rocket Lab, to name just two of its smaller rivals in the satellite market.

In March, Rocket Lab announced its own plans for a PSPC listing later this year, seeking a valuation of $ 4.1 billion. Rocket Lab, however, has 17 missions under his belt, and when he claims he will make “$ 1 billion in revenue in 2026,” he does so with a good understanding of the market that builds on long-standing relationships. with clients that include the US military and NASA.

Later this month, Virgin will launch another mission from its base in California’s Mojave Desert, carrying payloads for the U.S. Department of Defense and the Royal Netherlands Air Force. Branson is never one to miss a marketing opportunity, and with the next launch available for the whole world to watch online, the success and timing of the PSPC list will likely depend on the success of this next mission.

Galactic SPAC price volatility?

However, significant questions remain about the prospects for Branson’s best-known space tourism firm, Virgin Galactic, which has been sitting on the runway in one form or another since Burt Rutan won the X Prize in 2004.

Branson has now lost the first player advantage to Jeff Bezos, who announced earlier this month that he would fly into space in late July aboard his company’s Blue Origin spacecraft. As a congratulation Tweeter Branson, he pointed out that billionaire space race rival Bezos had capitalized on a four-year head start.

Virgin Galactic went public in October 2019 with a market cap of $ 1 billion as part of a SPAC merger with Social Capital Hedosophia, a publicly traded company run by former Facebook executive Chamath Palihapitiya. But the stock had a rough year, with stocks reaching $ 54 in February, reaching $ 16 in mid-May. On June 17, the stock closed up 4.47% at $ 36.95.

In February, Galactic reported its fourth quarter and full year results for 2020, but without generating any notable revenue, the company recorded a total aggregate loss of $ 273 million, up from $ 210 million in 2019. Galactic is confident there is cash available for a push – $ 666 million to be precise – according to the annual release.

With money in the bank, the uncertainty over Galactic may end soon. In May, Galactic took its spaceplane to the edge of space (55 miles high) and marked a big green check mark next to the first of three key test flights that will allow it to begin offering seats to paying customers. The Galactic team is confident they will complete the last two by the end of 2021. With its Unity spaceplane fully licensed by the United States Federal Aviation Administration (FAA), it can begin to put customers on its Virgin brand seats.

Seraphim Capital, a space-focused investment group, found in April that $ 7 billion in equity had already been spent on 11 PSPC deals slated for this year, a “watershed moment” for the tech industry spatial.

Others are less optimistic. “I encourage retail investors not to get caught up in the hype and do their homework when it comes to space service,†said Space Fund Managing Director Meagan Crawford. “Unlike most companies that do a traditional IPO, some of these companies are still many years away from revenue, still at a fairly early stage and, most importantly, at fairly high risk. This risk profile may not be acceptable to many retail investors. “