Richard Branson's Virgin Orbit has agreed to go public through a special purpose acquisition company (or SPAC) called NextGen Acquisition Corp II. The deal is expected to provide the company with $483 million in cash proceeds with investors, that include Boeing Co and AE Industrial partners, committing $100 million through a private investment equity placement. The deal will result in a value of $3.2 billion for the satellite launching company and will support its capital reserves until its operations begin to produce stable revenue streams which is expected to occur by 2023.

Virgin Orbit Stock

The merger is expected to close by the end of the year and will trade on the NASDAQ under the ticker name of VORB, with the company, launched in 2017, keeping its Virgin Orbit name. It follows another Branson company, Virgin Galactic Holdings Inc, which offers flights to space, going public through a SPAC deal in 2019. He recently took a flight with 5 employees of Virgin Galactic to promote the service which costs $450,000 for a seat on the flight. Branson said that the success of that deal encouraged him to make the current move and went on to say that this method of going public was less time-consuming and more efficient than going through a traditional public stock offering.

The satellite launch sector is experiencing significant growth as companies, including the Elon Musk backed Space Exploration Technologies Corp, compete to lower the cost of these missions partly by re-using launch rockets. Virgin Orbit is unique in that it uses a Boeing 747 to launch its rockets at an altitude of 35,000 feet. CEO Dan Hart has stated that the company has $300 million of contracts in the pipeline for its services with 18 launches expected to be completed in 2023 with this figure increasing subsequently. Boeing, for its part, announced its confidence in the satellite launch market and in Virgin Orbit as a provider.

SPACs

The deal demonstrates the continuing popularity of using SPACs, or blank-check companies as they are known, to go public rather than going the IPO route, with such companies raising over $129 globally in 2021 up from what was already a record $84 billion last year. In fact these types of transactions are increasingly being used to fund space ventures with Rocket Lab USA, another satellite launch company, also seeking to close a similar deal this week.

Despite their popularity, some SPAC transactions, have been difficult to complete as investors become more selective about the private investment aspects of these public equity deals. Lackluster performance by some companies that have gone down this route has led to short selling activity, complaints by shareholder activists and increasing attention from regulators, all of which have created hurdles to getting such deals done.

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