VORB - Wall Street Breakfast Podcast: Virgin Orbit Slumps Workforce Cuts

2023-03-31 07:11:17 ET

Listen on the go! Subscribe to Wall Street Breakfast on Apple Podcasts and Spotify Virgin Orbit ( VORB ) stock slumps ~43% in extended trading after co to ax nearly entire workforce . Why did EVgo ( EVGO ) stock surge on Thursday? Stronger than expected earnings , upbeat outlook. Tesla ( TSLA ) reportedly eyeing US-based battery plant alongside CATL. Learn more about these stocks with Seeking Alpha Premium .

Transcript:

Good morning today is Friday, March 31st and I'm your host Julie Morgan…

• Virgin orbit stock is set to hit record lows after failing to secure funding. The company is letting go nearly its entire workforce.

• Tesla is reportedly looking to build a battery plant in the U.S. The EV automaker is taking a page out of Ford’s playbook in a deal with chinese battery giant CATL.

• Wells Fargo has been hit with a hefty fine. The financial institution has been fined $97m for breaking U.S sanctions rules.

OUR TOP STORY

Virgin Orbit is cutting 85 percent of its workforce.

Premarket VORB is down nearly 48 percent.

Virgin Orbit said in a regulatory filing that it would lay off around 675 employees.

The company said it would do this "in order to reduce expenses in light of the Company's inability to secure meaningful funding."

Virgin Orbit added that the affected workers were located in all areas of the company.

Meanwhile, CNBC reported that CEO Dan Hart told employees during a meeting on Thursday that the company would cease operations "for the foreseeable future.”.

According to audio from a call obtained by CNBC, Hart called the changes dramatic and extremely painful.

If you remember, a couple of weeks ago we reported here on Wall Street Breakfast that VORB had furloughed almost all its employees and paused work for a week as it sought funding to stay afloat.

The company in the regulatory filing on Thursday said it estimated incurring charges of ~$15M related to the workforce reduction, of which $8.8M would be for severance payments and employee benefit costs.

VORB expects to recognize the majority of the charges in Q1 2023 and anticipates the workforce reduction to be completed by April 3.

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EVgo reported earnings that beat on the top and bottom lines for its fiscal Q4.

Following the report the company’s stock soared more than 20 percent on Thursday.

The Los Angeles-based EV charging company posted less than half the loss anticipated by analysts while revenue easily surpassed expectations as well. The company reported an adjusted EBITDA loss of $20.1M, better than the $22.5M loss expected.

According to the CFO, customer accounts increased by 63% year-over-year and year-over-year throughput growth of 69% exceeded year-over-year operational stall growth of 29%.

Moving forward in 2023, EVgo expects total revenue between $105M and $150M against a $147.20M consensus.

Just yesterday Stone Fox Capital published an article on EVgo. Stone Fox Capital leads the Investing Group, Out Fox the Street.

In the article, they rate EVgo a Sell. They say the company rallied following a quarterly revenue beat, but the company continues to pile on large losses. Stone Fox Capital says an investor needs to set aside feelings on the benefits of EVs and the needs of charging stations in order to make a smart investment decision.

Stone Fox Capital has more than 41,000 subscribers and the Out Fox the Street Investing Group has a free two week trial.

I’ll leave a link to its author page in show notes.

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While we’re on the topic of EV’s, Tesla is reportedly looking to build a battery plant in the US alongside Chinese battery giant CATL,

According to Bloomberg, citing people familiar with the matter, the outlet indicated the Austin-based EV manufacturer has alerted the White House about the plans.

Specifically, Tesla sought clarity on the implications of the combined effort with regard to Inflation Reduction Act rules.

However, when asked about this report at the White House daily briefing the press secretary said this:

I have not seen that reporting. I would have to check in with the team before I can respond.

According to the report , the new plant is tentatively slated for construction in Texas.

If you remember, Ford ( F ) inked a deal with CATL in February , confirming plans to invest $3.5B to build a lithium iron phosphate (L F P) battery plant in Michigan.

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NOW MORE ON THE MARKET

U.S. stocks on Thursday ended higher for a second straight session.

The Nasdaq closed 0.73% higher. The S&P 500 added 0.57%. The Dow gained 0.43%.

Leo Nelissen is an analyst with BN Capital. He said, “Stocks held up quite well after three Fed members came out making the case that higher rates and more tightening are appropriate to combat inflation if it remains persistent.”

Looking at the performance of the 11 S&P sectors, ten ended in the green, led by Real Estate and Technology, with the latter gaining more than 1%.

Sentiment on Thursday was additionally helped by economic data which showed that the number of Americans filing for weekly jobless claims increased to 198K, higher than the expected figure of 196K.

Turning to the fixed income markets, Treasury yields were mixed, with the longer-end 10-year yield ( US10Y ) dropping 2 basis points to 3.55% and the 2-year yield ( US2Y ) advancing 3 basis points to 4.11%.

IN OUR DAY WATCH

MORE OF OUR TOP STORIES

A Manhattan grand jury has voted to indict former President Donald Trump on felony charges, launching the first criminal case against a former president.

The precise charges are unknown and the felony indictment has been filed under seal, but Trump will now face surrender and arrest in the coming days.

Trump's lawyers have confirmed he's been indicted, according to the Associated Press, referring to payments made during his 2016 campaign to silence claims of an extramarital sexual encounter.

A spokesperson for the Manhattan district attorney's office said, "Guidance will be provided when the arraignment date is selected."

Digital World Acquisition, the blank-check company taking Trump's social media company public, is up 8% premarket following the late Thursday news.

The former president released a statement that said in part, "I believe this witch-hunt will backfire massively on Joe Biden."

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Sam Bankman-Fried, the 31-year-old founder of the now collapsed FTX cryptocurrency exchange, is pleading not guilty to additional charges .

At the same time, Bankman-Fried's attorney, Mark Cohen, said his client is not acknowledging that he can be tried on the new charges.

According to an Associated Press report, the attorney did not elaborate on the statement and left the courthouse quickly.

On Tuesday, Bankman-Fried was charged on 13 additional counts , alleging that he bribed Chinese government officials. This is in addition to the charges he already faces including fraud and money laundering.

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Wells Fargo will pay two fines totaling $97.8M for deficient oversight of sanctions compliance risks,

The Federal Reserve Board said the bank's inadequate oversight enabled it to breach U.S. sanctions rules by providing a trade finance platform to a foreign lender.

They said the lender used the platform to process around $532M in prohibited transactions from 2010 to 2015. The Fed, in turn, fined WFC a civil money penalty of $67.8M.

In a separate enforcement release, the Treasury Department's Office of Foreign Assets Control fined Wells Fargo $30M for some of the same reasons just mentioned.

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Now let’s take a look at the markets as of 6:20 am. Ahead of the opening bell today, the Dow, S&P and Nasdaq futures are mixed. The Dow is up 0.2%. The S&P 500 is also up 0.2% and the Nasdaq is flat.Crude oil is up 0.3% percent at less than $75 a barrel. Bitcoin is down 2.6% at $27, 882 dollars.

In the world markets, the FTSE 100 is up 0.2%. The Dax is up 0.6%.

On today’s economic calendar, at 10 am consumer sentiment and at 3:05 pm the fed’s John Williams will speak at a community college in Connecticut.

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