Billionaire Richard Branson’s satellite-launch company Virgin Orbit merged with SPAC NextGen Acquisition Corp. II (“NextGen”) (NASDAQ: NGCA) last week, and started trading under the ticker VORB. This is the Virgin company that launches satellites from a modified 747, not the one where they take space tourists to … space.
In the last few days of trading, it has fallen 17%, and I expect it to fall some more.
Branson does not have Musk’s aura, or Bezos’ new-found swagger.
Major negative sentiment on space (de)SPACs, including satellite plays.
Negative sentiment shared by NGCA shareholders - so many redeemed that Branson had to put in $100M so SPAC wouldn’t miss minimum cash requirements. SPAC managed to raise only $228M in cash compared to $483M target.
Crowded space with commercial players that already have a head start, like SpaceX and RocketLab.
They have done a handful of launches, but still tinkering.
Unclear if the 747-based launch will catch on although it is touted as being cheaper and more environmentally friendly
Its sibling, Virgin Galactic (SPCE), was a deSpac darling but has mostly disappointed since.
Came out of the gates with a $3.7B valuation, is now at $3.1B. 2021E rev is $15M, and 2022E rev is $70M. So… bit of a stretch.
For what it is worth, it’s not a terrible company. The tech works, it’s just not clear if there is sufficient demand for it.
Options Chain
As expected, the IV is pretty toasty given this bad boy is burning up on reentry. Nevertheless, if one expects it to glide to $5 or lower, (and I do,) there is still room for return here.
Just some doodling I did. Golden cross => sharp rise in price => violent reaction to EMA.
Based on this cycle I think there might be a potential for good put entry during morning volatility.
$VORB reversed today, actually rising 3% on the back of some PR. They will supposedly ring the bell on the trading floor too. PR moves not surprising, given how much it has fallen to $6.50 from it’s pre-merger price of $10.
Am considering this as a PR-driven bounce, and therefore expect prices to keep falling after, or at least not keep rising. Holding Puts for now.
Virgin Orbit founder Richard Branson said Friday that the satellite launch service collected enough cash from its recent SPAC deal to achieve its goals. Speaking to CNBC, the billionaire investor added that Virgin Orbit can beat the competition because of its more nimble business model, which allows the company to take off from almost any location. (Source)
VORB is up 22% on the two-pronged PR move of Branson appearing on CNBC, and VORB folks ringing the NASDAQ opening bell. This basically wiped out all the gains (if you had Puts) from the last few days.
There is one other launch scheduled for Jan, and another half dozen for the rest of 2022.
Will future launches buoy up share prices similarly? Or will the sell-off happen again?
Lesson learned: I really should have exited my position when the consolidation happened at the 8-handle. Those long green handles on the 7th should have been an indication that a reversal is unlikely. Still learning how to read TA tea leaves… I had also clearly underestimated the power of Virgin’s/Branson’s PR.
Next Steps: My Jan puts are, of course, way underwater. But because I do believe the valuation is bonkers, I have picked up a smaller Feb put position, all the while telling myself that I am not revenge trading. (Don’t revenge trade folks - it’s bad, m’kay?)
The contract has a five-year ordering period with a maximum total value of $300 million and will be managed by the Launch Services Program at the agency’s Kennedy Space Center in Florida.
And is now gliding back down into the 8-handle.
I feel like this is no longer the same play as it was a month ago, not necessarily because the company’s changed significantly but because there is too much attention on this and it will probably keep gyrating wildly as a result.
