VORB - Wall Street Breakfast Podcast: Virgin Orbit Crashes Into Bankruptcy

2023-04-04 07:51:47 ET

Listen on the go! Subscribe to Wall Street Breakfast on Apple Podcasts and Spotify Virgin Orbit ( VORB ) files for bankruptcy after failing to find a source of funding (00:35). Why are Bob Iger and Ron DeSantis at odds? It's a long story . (02:02) A Twitter logo change sends DogeCoin soaring and apes rejoice even as AMC stock slumps . (03:35)

Below is an abridged transcript of the podcast:

Another de-SPAC bites the dust on Tuesday.

• Virgin orbit has fallen out of orbit on Tuesday, announcing plans to file for bankruptcy.
• Disney and Florida governor Ron DeSantis continued a war of words, with the executive accusing the governor’s actions against the company of being “anti-Florida.”
• Finally, Elon Musk’s actions drive up the price of dogecoin once again. However, legal implications could follow.

OUR TOP STORY

Down go the de-SPACs! Richard Branson-founded Virgin Orbit ( VORB ) announced early on Tuesday morning that it would file for bankruptcy, just one day after fellow de-SPAC Boxed ( BOXD ) filed for Chapter 11 protection. Virgin Orbit had reportedly been drawing up contingency plans in case of insolvency as early as mid-March and had operated as a going concern since late 2022. After a launch failure in January, the company’s future had been clouded significantly, leading to an over 90% decline for the stock in a matter of a few months. By the close of March, the company had laid off nearly its entire workforce and ceased operations temporarily. A glimmer of hope from venture capital investor Matthew Brown did appear in late March however. According to Reuters, the company was in talks to secure a $200M investment from Brown via a private share placement to stave off insolvency. However, talks appeared to have deteriorated and that flicker of hope has finally been extinguished on Tuesday. The company will continue to seek buyers for its assets amid a Chapter 11 process.

“While we have taken great efforts to address our financial position and secure additional financing, we ultimately must do what is best for the business," CEO Dan Hart concluded in a statement. “We believe that the cutting-edge launch technology that this team has created will have wide appeal to buyers as we continue in the process to sell the company. At this stage, we believe that the Chapter 11 process represents the best path forward to identify and finalize an efficient and value-maximizing sale.”Seeking Alpha’s Quant team moved to a Strong Sell rating on the one-time De-SPAC darling as early as July 2022. A link to their rationale will be provided in the show notes.-

Walt Disney (NYSE: DIS ) CEO Bob Iger slammed Governor Ron DeSantis, calling out his actions against the company he helms as “not just anti-business, but anti-Florida.”The house of mouse and DeSantis have been at odds stemming back to the tenure of former CEO Bob Chapek, with the spat largely centering on the state's so-called "Don't Say Gay" bill. In March 2022, Chapek had pledged to oppose the bill and utilize corporate cash to pro-LGBTQ+ causes. The former CEO said that the company would “reassess [its] approach to advocacy — including political giving in Florida and beyond.”Following these statements, DeSantis moved to strip Disney's control over its special Reedy Creek governing district around Disney World, privileges it has enjoyed for over half a century. The latest twist in the legal drama even involved a novel action by the entertainment giant that invoked the longevity of the British royal family in certain clauses.Iger called the entire saga a protracted case of retaliation on Monday.“While the company may have not handled the position that it took very well, a company has a right to freedom of speech just like individuals do,” Iger said . “It seems like he’s decided to retaliate against us...to punish a company for its exercise of a constitutional right.”He also highlighted the billions of dollars in investments and thousands of jobs provided to Florida by Disney.Seeking Alpha contributor Dair Sansyzbayev recently argued that investors should not bet against Bob Iger given his strong track record. I’ll leave a link to his author page in show notes.–Moving from Disney to Doge, the meme-driven cryptocurrency surged on Monday. As is typical for doge, the move was largely driven by the actions of one Elon Musk.

Lawyers for the Tesla executive filed a request to a U.S. judge on Friday to end a $258B lawsuit accusing him of conducting a pyramid scheme to prop up the price of dogecoin (DOGE-USD). Investors had sued Musk for inflating the price of the coin and promoting it via his social media channels.“There is nothing unlawful about tweeting words of support for, or funny pictures about, a legitimate cryptocurrency that continues to hold a market cap of nearly $10 billion,” Musk's lawyers said in the filing. “This court should put a stop to plaintiffs’ fantasy and dismiss the complaint.” Stoking the controversy as ever, the Musk-owned Twitter changed its logo from a bird to a picture of a doge on Monday. Musk also shared a meme on the platform noting the change. The price of the meme coin leapt over 30% at the intraday high on Monday–

NOW MORE ON THE MARKET

Major US indices were mixed on Monday, with both the Dow and S&P moving higher while the Nasdaq pulled back, feeling the impact of EV stocks skidding on downbeat delivery figures.

The Dow Jones Industrial Average rose 326 points, edging higher alongside the S&P 500 which closed 0.3% higher. The Nasdaq Composite meanwhile slid 0.2%. UnitedHealth, Walgreens, Chevron were top gainers in the Dow, the latter of which was bolstered by news that OPEC+ will slash output by 1.16 million barrels per day. Each of the top 5 gainers in the S&P on Monday were energy companies, led by Marathon Petroleum which rose nearly 10%. The energy select SPDR ( XLE ) jumped 4.6%. Brent crude rose 6.3% for its best showing since March 2022 to $84.93/bbl. WTI also jumped 6.3% to $80.47.Turning to the bond market, buying pushed yields lower across the board. The 10-year yield (US10Y) slid 7 basis points to 3.42% and the 2-year yield (US2Y) dropped 9 basis points to 3.97%. Meanwhile, the 5-year dipped 8 bps to 3.53% and the 30-year dropped 5 bps to 3.64%.JP Morgan’s Marko Kolanovic wrote in a note appraising the day’s action: “Any decline in yields is not a sign that the FED is about to bring a punch bowl for tech stocks, in our view, but rather a sign that recession probability has increased. We expect a reversal in risk sentiment and the market re-testing last year’s low over the coming months.”

IN OUR DAY WATCHThe earnings calendar is particularly sparse as we begin the calendar second quarter. That said, MSC Industrial (MSM), Dlocal Limited (DLO), Smart Global (SGH), and Kirkland's ( KIRK ) are notable names on Tuesday’s docket. Outside of earnings results, Academy Sports and Outdoors ( ASO ) will host its first-ever Analyst and Investor Event. Cloud software company Domo ( DOMO ) is also scheduled to hold an investor and financial analyst session starting after the market open. The economic calendar is also thin, with the census bureau expected to update Factory Orders data and a Job Openings and Labor Turnover Survey due from the Bureau of Labor statistics. On Tuesday evening, FOMC member and Cleveland Fed President Loretta Mester will discuss economic and Fed policy outlook at an event hosted by the money marketeers or NYU.

MORE OF OUR TOP STORIES

The surprise decision by OPEC+ to cut production is still roiling markets. Treasury Secretary Janet Yellen told reporters on Monday that she feels the action by the oil producing cartel was “regrettable” and portends negatively for global growth. President Biden, however, took a more optimistic tone, assuring reporters that the impact of the announcement is “not going to be as bad as you think.” As of the close of March, the US Strategic Petroleum Reserve held 371.58M barrels of oil. According to the Energy Information Administration, that is the lowest level in nearly 40 years. Goldman Sachs raised its forecast for Brent crude this year to $95/bbl and $100/bbl in 2024. On the other end of the spectrum, Morgan Stanley actually cut its Q3 Brent price forecast to $90/bbl from $95/bbl previously and Q4 to $87.50 from $95, saying the OPEC output cut betrays a weak outlook for the global oil market. We will touch upon oil futures in just moment-Rounding out top stories with another meme favorite in legal turmoil. AMC Entertainment ( AMC ) stock slumped over 25% in premarket action on Tuesday after the disclosure of a binding settlement with plaintiffs in its stock conversion lawsuit in order to lift a "status quo order" and proceed with its conversion of AMC Preferred Equity units ( APE ) into common stock. Per the terms, plaintiffs and the company will jointly request that the status quo order be lifted. The terms also specify a settlement payment in Class A common stock. AMC has agreed to pay the plaintiffs one share for every 7.5 shares they own. The shareholders’ lawyers indicated shares paid to their clients will be worth over $100M.AMC Entertainment Holding Preferred Equity Units ( APE ) surged nearly 30% in early pre-market trading.–

Now let’s take a look at the markets as of 6:20 am ET. Dow and S&P futures were muted while the Nasdaq showed signs of a Tuesday rebound. WTI crude oil futures (CL1:COM) held on to their gains after a surprise cut from OPEC+, climbing about 1% to $81.22/bbl.

In the world markets, the FTSE 100 rose 0.1% and the DAX bounced 0.86%.

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