Virgin Orbit, the satellite-launching sister company of space tourism venture Virgin Galactic, is to list on Wall Street via a reverse merger with a special purpose acquisition company (Spac). The deal, which values Virgin Orbit at $3.2 billion, is expected to raise $483 million and complete before the end of the year.
The money raised has been earmarked to fund rocket manufacturing facilities and the futuristic company’s “space solutions business”.
The blank cheque Spac that has agreed to the merger, which will see Virgin Orbit take over its stock market listing to float, is NextGen Acquisition Corp II. Investors put forward funds for Spacs to use when they have pinpointed a suitable acquisition target.
Spacs are often referred to as an ‘investment lucky dip’ as investors who put up the funds rarely know exactly what company their investment will ultimately go into. Those behind Spacs can take a cut of up to 20% of the value of deals – a situation that has led to worries the incentive can lead to overvaluation of the companies the vehicles merge with to send public.
Virgin Galactic also went public via a Spac a little under two years ago and Virgin Atlantic, the Virgin Group’s transatlantic airline is planning a London IPO as founder Sir Richard Branson raises funds across his empire.
Long Beach, California-based Virgin Orbit was spun out of Virgin Galactic in 2017. It hopes to “transform access to space” by significantly reducing the cost of sending satellites into orbit. It does so with the help of a customised 747 jet that carries rockets high above the Earth before they are launched from height into near space. The technique is significantly cheaper than launching rockets from a standing position on the surface of Earth.
The company has had three launches since last summer with one more planned for this year and another six scheduled for 2022.
The merger with NextGen, which has around $383 million in cash to plough into Virgin Orbit as part of the deal, will see the latter list on the Nasdaq exchange at a pro-forma enterprise value of $3.2 billion. Investors including Boeing have also committed to investing a further $100 million to top up the funds raised.
Virgin Group currently owns 80% of Virgin Orbit with the remaining 20% held by UAE sovereign wealth fund Mubadala. After the reverse takeover, Virgin Group, plus staff, will hold 68% of the company, Mubadala 17% and the remaining 15% will be split between NextGen’s investors and the private equity consortium.