Branson’s second space SPAC draws awkward parallel
LONDON, Aug 23 (Reuters Breakingviews) – Architects of blank-cheque mergers are whizzes at validating the stratospheric financial forecast. Revenues soar and losses transform into profits in five-year investment plans, at least on paper. Valuations, too, are carefully calibrated against rivals, some high-flying, others earthbound. In that regard, Richard Branson-backed Virgin Orbit’s deal to be bought by special purpose acquisition company NextGen Acquisition Corp II (NGCA.O) conforms to type. The comparisons to the lofty ambitions at Branson’s other space venture, Virgin Galactic, are an unfortunate by-product.
In the arcane world of small-satellite launching, Virgin Orbit has solid claims to uniqueness. Its rockets start their journey from the wings of a cruising Boeing 747, making them greener, cheaper and more versatile than those launched from the ground. And demand for small satellites in low-earth orbits is likely to grow quickly, driven by everything from advances in military and communications technology to the evolution of the internet of things. Morgan Stanley reckons the space economy could be worth $1.1 trillion by 2040.
Yet Virgin Orbit is still in its infancy. Its first successful orbital launch was only in January. And this year’s revenue will be a mere $15 million. From there sales will have to grow at 217% every year to hit its $1.6 billion revenue target in 2025. By contrast, $4.3 billion Rocket Lab, its closest rival with 21 successful launches under its belt, is projecting compound annual revenue growth of just 82%, according to projections in Orbit’s presentation. Virgin Orbit is also punchier about its profitability, predicting a 32% EBITDA margin five years’ hence against Rocket Lab’s 22%.
For investors who find that too much to stomach, Virgin Orbit can handily point to another space-related venture with even more out-of-this-world projections – 288% annual revenue growth and 47% EBITDA margins. Said outfit is also valued at 13 times 2025’s potential revenue against just 2 times for Virgin Orbit.
Awkwardly for Branson, this lofty benchmark is $6 billion Virgin Galactic (SPCE.N), the tourism vehicle that recently transported the bearded Brit to the edge of space. In his attempts to launch one venture into the financial stratosphere, Branson may unwittingly help bring another back down to earth.
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– Billionaire Richard Branson’s Virgin Orbit is going public via a merger with a blank-cheque vehicle NextGen Acquisition Corp II in a deal that values the satellite-launching business at $3.2 billion.
– Virgin Orbit, which was spun off from Branson’s Virgin Galactic space tourism venture in 2017, is expected to receive $483 million of proceeds from the deal with NextGen.
– Those proceeds include $100 million from private investors such as aerospace giant Boeing and AE Industrial Partners.
Editing by Lauren Silva Laughlin and Amanda Gomez
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