Virgin Orbit update...., page-8

Thanks Patawalonga……………………..

I don’t think there is anyone on this forum who doubts my positive outlook and massive potential for SAS. Some might find me a little over the top at times, but it is hard not to get excited about potential future multiple revenue streams at comparatively minimal cost. I have read and taught myself as much as possible about what SAS is all about….. it’s aims as a business to provide cheap voice & data to millions in the equatorial belt …….. and beyond, at a later date.

At times it is hard to remain at a safe (emotional and financial) distance from a stock that you understand to hold so much potential. To fall in love with a stock is relatively easy – to fall ‘out of love’ with a stock is akin to being the driving force / initiator of a divorce. No, I have no intentions of turning into a romantic stock holder, just suggesting that it is easy to become emotionally ‘blinkered’ to the positive side without allowing room or time to contemplate likely downsides.

I learnt a valuable lesson back in late 2011 when invested in a stock that held a mountain of potential in an overseas exploration play. Commitments were made by the company with funding arranged to support those commitments. The funding was all but secured………….. BUT, due to an unexpected financial with the calamity with the backers, they reneged on its agreement to support the company and as a result, left the company high and dry.

So here we are, 4^th April 2018 and another CR close at 12c. that supposedly should all but cover the make and deployment of some 20 x Pearls.

Around March last year, we saw a pre-Diamond launch sp high of 28c. This was achieved despite minimal deals and no launch and no testing of proof of technology. This was possibly a higher price than most would have expected at the time, but the price nonetheless.
Since the trouble free launch we have had very successful testings and 100% proof of technology. The ‘test’ Diamonds are now generating income in their polar orbit. This is considered to be an unexpected bonus for the company as income was never intended to be derived from the 3D’s. We have had many essential milestones met and solid agreements made to support the technology and capabilities that SAS can provide its customers in the future.

Management’s record of achieving pre-announced milestones is outstanding. However, over this past year that included the successful launch and subsequent outstanding progress toward the 200x Pearl constellation deployment, we have seen the sp fall by more than 50%. With such great advances made, I find this 50+% drop, hard to fathom – I simply don’t get it! However, I take responsibility and ownership of my concerns. If I didn’t, I wouldn’t be invested and you wouldn’t be reading this.

To me there is a vast difference between SAS meeting technological milestones and getting the required funding to ensure those milestones are met and in synch with the exponential growth path. Management has considerable control over the technological milestones and sales deals being met of which they have done spectacularly well. However, they have little to NO control over the funding of the project. In the absence of a gun being held to anyone’s head, money is removed from the pockets of investors, by the investors themselves (large & small) and given under good faith to SAS to advance its project with the belief their investment will garner a solid return.

So far, so good. Funding targets from Soph Investors and existing shareholders have been met. Though I suspect this current CR may have been a bit of a struggle, the raise was underwritten, so in this instance the minimum is assured.

My concern is this……..

If future CRs are to be done the same way and if our major investors are not going to underwrite it in total, SAS may face some unexpected and unnecessary headwinds.
If future CRs are to be successful with a stagnant or diminished sp, SAS could be forced to offer ‘options’ as a CR sweetener. This may well get the money in the bank (and some additional funds when options are converted to FP shares), but is would also add to the number of shares on offer. This in turn could well lead to a restructure or consolidation of shares.

In a perfect world, even this is not all that bad especially if SAS can help fund new Pearls with proceeds generated from operational Pearls, without losing its market and sales potential from any time delays this might incur.

HOWEVER, this is certainly not a ‘perfect’ world! It continues on a path of becoming less perfect and less stable every day. SAS leaves itself fully exposed to the health, viability and access to global financial markets. Even “Blind Freddy” can see these markets are on the brink of a total meltdown that will make the GFC look like a mere piggy bank robbery!

Without a guaranteed funding facility for the ‘whole’ constellation firmly in place and only token income generated from the 3Ds, SAS leaves itself exposed to the future frailties of the financial markets. Make no mistake if the financial markets blow-up sometime between now and our first launch in 2019, so does SAS…………….. assuming nothing is done between now and then, to guarantee full funding.

I would have much preferred to have no funding issues NOW, with required funds in the bank, than have SAS attempt to go it alone as it appears to be doing at the moment. Raising periodic amounts of cash along the way, to keep the wheels greased and Pearl production on schedule is fine – in a perfect world. Its current methodology of funding does not sit well for me. I see a financial calamity breaking out pre-constellation deployment in 2020 and a resulting drying up of available i.e. investible funds from both shareholders and the financial markets. I hope I am wrong, but fear I am right.

SAS has no control over global financial markets, but it does have a responsibility to ensure that everything is done to ensure the project is funded through to full 200x constellation commissioning.

To chase ‘preferred’ money or a ‘preferred’ partner at the cost of confirming total funding now (if they have been playing that card), is potentially endangering the whole project IMO. As good as this project is………………. and I still think it is the best thing I have come across, the company must take responsibility for total constellation funding NOW. To not do this, I fear it is leaving itself and all concerned, needlessly exposed to a financial market on the cusp of a major meltdown. If, or should I say when that happens, the current funding options available to SAS now, may well disappear. Investors, banks & financial institutions will get smashed at the exit gates, clamoring in a desperate bid to balance their books and remain solvent.

This post may not go down too well with some of you or with management, but I am not here to win friends. I do not believe I am fear mongering nor being unnecessarily alarmist. I keep myself up to date with as much global news as possible, sorting out the ‘fake from the real’ as best I can. I simply want to voice and share my concern over the apparent ongoing funding methodology, as a substantial SAS shareholder.

My concern is that SAS might well be caught with its funding pants down, falling short of production and deployment costs prior to the Pearls being self-funding. If insufficient numbers of Pearls are generating money during the coming financial sheet-fight, to allow for production, deployment and commissioning to take place, then potentially we are screwed!

I’d rather raise a red flag than a white one!


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