Exclusive-Virgin Orbit near deal to raise $200 million from Matthew Brown-term sheet

(C) Reuters. FILE PHOTO: A replica model of Virgin Orbit’s LauncherOne rocket sits in a media area ahead of UK’s First launch at Newquay Airport in Newquay, Britain, January 8, 2023. REUTERS/Henry Nicholls/File Photo

By Joey Roulette

WASHINGTON (Reuters) -Billionaire Richard Branson’s cash-strapped Virgin Orbit Holdings Inc is near a deal for a $200 million investment from Texas-based venture capital investor Matthew Brown via a private share placement, according to a term sheet seen by Reuters.

A successful deal would be a major boost of confidence in the satellite launch company that saw its market capitalization slump to a record low of $150 million on Tuesday from more than $3 billion two years ago when it went public through a blank-check deal.

Virgin Orbit has been grappling with dwindling cash and mounting losses in recent quarters, as space startups struggle with rocket launches in a highly competitive market.

Its rocket LauncherOne in January failed a mission to deploy nine small satellites into lower Earth orbit due to an anomaly during its flight through space.

Virgin Orbit, which received about $35 million of capital injections from Branson’s Virgin Investments in recent months, said last week it was exploring strategic options and was in talks for fresh funding after a cash crunch forced it to pause operations and furlough nearly all its staff.

Virgin Orbit and Matthew Brown are aiming to close the deal on Friday, according to the term sheet, which is not binding and remains subject to final agreement.

Virgin Orbit was not immediately available to comment, while Matthew Brown Companies did not respond immediately to a request for comment.

Virgin Orbit’s board agreed to move forward with the deal at a meeting held on Tuesday, according to a person with direct knowledge of the matter.

Shares in Virgin Orbit more than doubled to 98 cents in premarket trading on Wednesday after Reuters first reported the news.

Under the deal, Matthew Brown will be entitled to convert his $200 million investment in Virgin Orbit’s preferred shares into common shares at the volume weighted average price in the 30 days before the deal is signed.

The converted shares will possess the same voting rights as the common stock. Virgin Investments is currently the largest shareholder with a stake of nearly 75%.

The company booked a loss of nearly $44 million for the third quarter and had cash reserves of about $71 million at the time, a sharp drop from $122 million as of June-end. It has yet to announce a date for its fourth-quarter results.

Reuters reported on Tuesday that Virgin Orbit plans to recall a small team from the furlough on Thursday to work on rocket upgrades.