The rumoured SPAC merger between NextGen Acquisition II (NASDAQ:NGCA) and Richard Bransons Virgin Orbit has come to fruition in a $3.2 Billion deal. Virgin Orbit announced this morning that they have entered into a definitive agreement to become a publicly traded company through a business combination with NextGen Acquisition Corp. II (NASDAQ: NGCA).
The proposed merger is already building hype on Wallstreet, which comes after Branson’s success in its previous SPAC venture which took Virgin Galactic public (NASDAQ:SPCE). The NGCA merger will see Virgin Orbit trade under the stock ticker (NASDAQ:VORB) which is expected to close at the end of the calendar year. With investors now intrigued in the NCGA and Virgin Orbit proposition, this article will breakdown three key points to take away.
Virgin Orbit SPAC merger to raise $483 Million
Firstly, the NGCA merger will raise $483 Million for the combined company to fund its expansion strategy over the next few years. The funds will enable Virgin Orbit to “scale rocket manufacturing to meet customer demand and to fund growth in its space solutions business” alongside the companies Research and Development efforts. The cash infusion is expected to fund Virgin Orbit through to it expects to reach a positive free cash flow in 2024.
This includes a $383 million cash injection from the trust account of NextGen Acquisition and a $100 million from fully committed PIPE investment at $10 a share. The PIPE investment is led by strategic and institutional investors including Boeing and AE Industrial Partners.
“Our success in launch has driven the business forward, and now we expect this investment will enable us to build on our R&D efforts and our incredible team. We are driving innovation with world-class design and advanced manufacturing capabilities, our unrivaled mobility of launch, and our exciting space solutions services.” Dan Hart, the CEO of Virgin Orbit
Virgin Orbit to generate $2 Billion in revenue by 2026
In Virgin Orbit’s investor presentation released earlier today, the company forecasted revenue to flourish over the coming years. With a kick start in funding from the proposed SPAC merger, the company expects to generate upwards of $2 Billion in revenue by 2026. Over the next 5 years, Virgin Orbit forecasts revenue to grow at a CAGR of 166%.
The companies revenue outlook is broken down into three main segments. This includes Commercial and Civil Launch, Nation Security and Defence and Space solutions. As we discussed in our Rocket Lab article, the demand for commercial launch services is growing at a rapid pace. Integrated IoT and Earth Observation services are also a target for Virgin Orbit and Rocket Lab, with a huge total available market (TAM). If you are interested in Virgin Orbit’s forecasts the link for the presentation will be here or can be found on the companies IR website.
NGCA & Virgin Orbit Merger expected to close later this year
Lastly, the proposed business combination is expected to close at the end of 2021. Until then, NGCA will continue to trade on the NASDAQ. The SPAC merger process will require approval by NextGen’s (NASDAQ:NGCA) shareholders alongside satisfaction or waiver of other customary closing conditions. Given the success of the Virgin Galactic combination last year, investors are confident Virgin Orbit will be publicly trading by the end of 2021.
However, in recent months the SPAC market hype has vanished as post merged companies struggle to maintain investor momentum. Pre-merger SPAC tickers generally experience high levels of volatility as investors speculate on the post-merged companies valuation. Nevertheless, the proposed merger offers investors a unique entrance into the aerospace industry.
The Bottom Line – Virgin Orbit merger
In summary, the Virgin Orbit merger has caught the attention of investors on Wallstreet. With the success of SPCE alongside other direct competitors such as Rocket Lab taking a similar trajectory, we can expect further interest over the next few weeks. However, investors can expect higher volatility pre-merger as both companies close in on the $3.2 Billion deal.
The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Subscribe to our Youtube channel here.
We are now official partners with Tradingview
Firstly, Tradingview is a social network of 30 million traders and investors using the world’s best charts and analysis tools to spot opportunity in global markets. You can sign up to Tradingview by clicking the banner below. Tradingview allows you to follow your favorite assets, find trading ideas, chat with others, spot trends, and place trades directly on our charts.
Looking to start trading in Australia or the UK?
Do you live in Australia or the United Kingdom and looking to invest in the US market? Good news! We’ve partnered with Stake. Trade 4,500+ US stocks and ETFs with $0 brokerage and no fx fees per trade. Use our code “YIG” to receive a free stock when funding your new account.
In addition, Stake is one of the leading US trading platforms for Australian and UK investors. Click hereto start trading US stocks with a streamline trading experience. Lastly, for more information on our referral program and how it works click here.