by Douglas Messier
In a clear sign of investor skepticism, Richard Branson’s Virgin Orbit will receive only about $228 million of the $483 million in growth capital it expected after merging with the NextGen Acquisition II special purpose acquisition company (SPAC).
NextGen Acquisition II Corp shareholders voted to merge with Virgin Orbit on Tuesday, Dec. 28. The merger is expected to close by the end of this year. The merger will allow Branson’s launch company to go public under its own name on the Nasdaq stock exchange on Jan. 7 with the British billionaire expected to ring the opening bell. VORB will be used as the company’s stock symbol. [Correction: Virgin Orbit began trading on Dec. 30; the bell ringing ceremony will proceed as scheduled on Jan. 7.]
Under the merger plan announced in August, the $483 million investment was divided as follows: $383 million in cash from NextGen’s trust account and $100 million in private investment in public equity (PIPE) funding led by Boeing and AE Industrial Partners. The deal would have valued the company at $3.2 billion.
The $383 million in cash assumed that no NextGen shareholders would redeem their original investment by selling their shares back to the company before the merger. But, a number of them apparently did. The result is that Virgin Orbit will received $68 million from NextGen’s trust account, while the amount of PIPE investment rose from $100 million to $160 million. Thus, the merger will produce approximately $228 million in gross proceeds.
On Dec. 23, five days prior to the NextGen shareholder’s vote, Virgin Orbit announced the Virgin Group’s intention to purchase up to $100 million of Virgin Orbit common stock in an additional PIPE investment at a price per share of $10.00.
“NextGen Acquisition Corp. II’s Sponsor will be supporting a portion of the Additional Equity Amount alongside the Virgin Group. The Additional Equity Amount will be determined by the amount of investment, if any, required to satisfy the minimum cash condition as defined in the merger agreement up to a maximum amount of $100 million,” Virgin Orbit said in a press release.
The reduced amount from the merger means Virgin Orbit will likely need to offer additional shares to the public after it begins trading in Nasdaq next month. Such an offering would dilute the shares of existing stockholders.
It is not clear how much ownership Virgin Orbit’s current shareholders — Virgin Group, Mubadala Investment Company, and management and employees — will retain in the merged company. Under the original $483 million merger, the shareholders would have retained approximately 85 percent ownership. PIPE investors and the SPAC sponsor would own approximately 3 percent and 2 percent of Virgin Orbit, with public shareholders owning approximately 10% of the company company.
Virgin Orbit orbits satellites using a modified Boeing 747 and an air-launched booster and has also invested in satellite manufacturers. Virgin Orbit said it would use the funding raised through the merger “to further scale rocket manufacturing to meet customer demand, and to fund growth in its space solutions business and Virgin Orbit’s ongoing product development initiatives.”
Despite the much lower amount of funding, Virgin Orbit officials celebrated the NextGen vote.
“We’re on track to end December with Virgin Orbit as a publicly traded company – a fantastic way to celebrate and cap an incredible year that started with delivering a dozen satellites for its first customer, NASA, into their target orbit in January,” Branson said in a press release. “Thanks to [Virgin Orbit CEO] Dan [Hart] and his world-class team, along with the support of our partners at NextGen and other investors, Virgin Orbit is well positioned to continue revolutionizing satellite launch and building unrivalled space technology that we believe will positively change the world. With a diverse and global customer base, it is the only launch company that can go anytime, from anywhere, to any orbit. With the company preparing for a third consecutive successful launch in January, I’m thrilled to support Virgin Orbit as it becomes a publicly traded business and builds on the incredible successes that we’ve seen this year.”
Dan Hart, Chief Executive Officer of Virgin Orbit, added, “This marks another major milestone for Virgin Orbit in a year that has seen us prove our technology and place satellites successfully into orbit for commercial enterprises, the US government, and for our allies. The capital raised through this transaction combined with our new access to the public markets, will enable us to scale rocket manufacturing and extend our space solutions business and product development while we continue to expand globally through key partnerships with customers worldwide. We have a world class team that has become known for their creativity and skill for design and advanced manufacturing. We look forward to driving enduring shareholder value by delivering unrivaled mobility of launch and space access, and exciting space solutions services.”