They paid $100k to ride on Xcor's space plane. Now they want their money back
latimes.com
latimes.com
Honestly these things are very risky engineering efforts for an average person to invest in. Certainly not with cash up front.
When you purchase a ticket on a spacecraft that doesn't yet exist, hasn't even been fully developed yet, and that no one has ever flown on, it's quite a different situation. I don't think the company lied about any of these facts. It should have always been clear that there was more risk involved.
And the reason the refund won't happen has little to do with bankruptcy protections and everything to do with the fact that the company failed. It turns out what they had tried to do was harder than expected, and they spent all their money without coming close to the end goal. That money is gone and won't be coming back, regardless of anything having to do with bankruptcy. As the saying goes, you can't squeeze blood from a stone. In theory they may be owed their $100k back, but in practice they'll never get it because it's no longer there.
This to me just sounds like semantics. Is there a point I'm missing? Bankruptcy is for failed companies, failed companies go bankrupt.
> Xcor owes them a full refund, and the only reason it won't happen is due to bankruptcy protections
Implying that, absent bankruptcy protections, the customers would somehow get their money back. My point was that, even if bankruptcy protections didn't exist, and those debts couldn't be discharged, the customers are still never getting their money back because it was spent on R&D and the company itself is now valueless.
No, bankruptcy is not exclusively for failed companies.
And failed companies don't always go bankrupt.
It's only fraud if they misrepresented the fact that it didn't yet exist, which seems very unlikely.
Buying things that don't yet exist happens all the time. Thousands of people put down deposits on Tesla Model 3's that did not then exist. People regularly buy houses under construction, and people often lose money when the contractor fails to deliver. It happens all the time.
Fraud can pierce the veil, so it's not just the company that they can go after, but also anyone responsible for the fraud.
... But where I am, bankruptcy only lasts 3 years + 1 day, after which point, those that had shares within the entity that has failed, or the part-owners, will be required to begin paying back their debts. Bankruptcy is not a failsafe to prevent you paying all debts. It's just a timeout to give you time to be in a position to pay those debts. And yes, it can be declared multiple times, but it won't always be accepted.
When such a company runs out of money, nobody else will be required to come up with cash to pay its debts. You don't need to read the bankruptcy laws to verify that, it's just the definition of a limited liability.
The USA having bankruptcy protections is what helps foster this level of risk and entrepreneurship here.
In this case, Xcor would need to pay back the fees they said would go to escrow. Not any investor who took equity on the gamble it would be worth something.
Certainly, if people were promised that there was money in escrow and it wasn't, that sounds like fraud, but that doesn't mean those who perpetuated the fraud have the money either.
I don't know the details of the situation but fraud happens all the time as well and without having more information, I wouldn't discount it as a possibility.
It's not at all the same situation as buying a "ticket" for a rocket that hasn't even been built yet; those funds are going to be spent on R&D with no guarantee of success, and you're never going to get your money back; the best case scenario is you get to take the trip.
Literally every business/engineering project ever.
That won't matter. This sort of situation actually happens all the time. When a corporation goes into bankruptcy, customers are the last on the list to be paid.
A more common scenario: A ski resort goes bust. What happens to people who have purchased season tickets (ski as much as you want all year) when the ski season at the resort is cancelled? There is no practical way to provide the purchased service. The entity that sold the ticket is bankrupt. By the definition of bankruptcy, there isn't enough money for everyone. The government (taxes), secured creditors and banks are paid out first. Then employees (pension funds etc) come next. There just isn't ever anything left for customers.
In an investment, the investor is intentionally putting money at risk in the hope that the project is successful. It's established up-front that if the project is unsuccessful, the invested money is lost. It's probably unfair for an investor to feel cheated when an investment doesn't work out.
With this purchase, Jones paid Xcor in exchange for a service that Xcor said it could provide. Xcor neither provided the service nor can provide a refund, and Jones is very right to be upset. It's probably fair to distrust the people behind Xcor for any future financial commitments, much more than if it had been presented as an investment.
You might say that this particular purchase was obviously risky enough that any reasonable person should have seen it as an investment, but I'd be hesitant to assume that the full risks were clear to everyone who paid the money, and the burden is on the company to not make commitments it can't keep. (That said, I certainly don't know if or how the risks were communicated to buyers.)
Generally, the receivers (bankruptcy administrators, lawyers, accountants, etc) are paid first. Mysteriously their fees always seem to add up to exactly however much money was left, and there is nothing left for anyone else.
Don't go handing over money without some recourse if things fail to materialize.
Don't sell something you can't deliver, most especially to bypass accredited investor laws (by selling tickets versus securities). Don't misappropriate your customers' escrow accounts (the article specifically mentions these funds were to be held in escrow). This applies whether it's a $100k ticket to space or a $200 piece of electronic kit on Kickstarter.
I'm guessing that won't be acceptable to Xcor because they intended to spend the pre-sale money on R&D.
That makes you a.......
It's his money and he should have gotten the ride, but then Chapter 7 is part of life for everyone included. If he tried to get some sympathy on the "scraping together the money" angle he gets none from me. $100K ticket to space when you have to borrow, move money left and right etc is not prudent.
Well, as soon as have a spare $200k to take a rocket flight vacation, that is ..
Gimme a good suit, and I'll land myself. ;)
[1] https://history.stackexchange.com/questions/9656/how-much-di...
But, why? What possible benefit is there from a suborbital vomit ride? They're probably not even high enough to get the overview effect.
This is going to be the day of downvotes for me, but I can't see what good comes from strapping people in to a vehicle that gets less than 3% of the energy needed to get to orbit for a ticket price of $100k. None of the technical problems you'd have to solve would advance real spaceflight. It cannot be the space frontier dream of humankind to lob themselves briefly to 8 times the altitude of an airliner and then flop back down.
I'd have been embarrassed to have gone on that trip for that price, to the point that I'd have turned down a free ticket for fear of having given the impression that I'd paid.
That's just not true. Spaceflight is hard. There are many, many technical problems to solve. Just because you're not going to orbit, doesn't mean that you're not advancing the state of the art.
I'm a former XCOR investor. I supported them not for their suborbital program, but for their orbital vision [see e.g. https://spacenews.com/34930xcor-aerospace-makes-plans-for-re...]. The Lynx was a stepping-stone, a way of both funding their larger ambition and testing small parts of the larger system. The idea was to build to space as incrementally as possible, so as to be able to avoid the huge "and then we need $100M, and then it works or it doesn't" step that most space business plans have. Remember that the founding team had just come out of the crater of Rotary Rocket, which had one of those plans. Jeff Greason once said that if he could find a way to fly half a customer to space, he'd do it.
Unfortunately, there were still some lumps in the capital needs, the jump from engines to the Lynx was larger than expected, the Lynx took longer than expected, and the funding wasn't there. If they'd had another $20M, it could have been amazing, but that's a common refrain.
XCOR's plan was basically the opposite of SpaceX: rather than going orbital and then building in reusability, they started with total reusability and then wanted to bootstrap to orbit. Their goal was full airplane-style reuse, where you land, inspect, fuel, and go, and fly the same craft again in a matter or hours or minutes. They'd already demonstrated that kind of turnaround with their rocket-powered airplanes; I believe I saw a video of a sub-15-minute turnaround on the EZ Rocket. They'd also made engines that could withstand hundreds if not thousands of firings, and pumps that lacked the catastrophic failure modes and tiny tolerances of turbopumps.
Yes, I lost all the money. But it was worth a shot.
Reaching an altitude of 60 km is just barely leaving the surface of Earth. Not at all impressive and totally not worth the time and hassle, never mind paying $100,000.
Hell, people spend hundreds of millions of dollars on artwork -- I'd be much more inclined to do a $100k suborbital flight over that, and it's a drop in the bucket to those people too.
What does this even mean? As I'm sure we all know here, there is in fact gravity in space near the Earth. Astronauts on the space station experience 0.89g at 200 miles altitude. You get a feeling of weightlessness by masking gravity with inertial forces, not by being far from Earth (I mean, being far from Earth would do it, but you have to be really, really far. Certainly further than $100k is going to get you). If you just want to experience weightlessness you don't have to go far from Earth at all. Just take a trip on the vomit comet for $5k.
A parabolic arc with a larger height enables a longer period of weightlessness. You're welcome to debate whether it's good value for money, but the article's statement isn't wrong -- Xcor's spacecraft can (EDIT: theoretically) provide 90 seconds of weightlessness because of the height to which it travels. You can't replicate the same experience on the vomit comet; its service ceiling and maximum speed aren't high enough.
Vomit comet gets about 25 seconds but can do 60 or more such periods in a single flight. So in total they'd have 25 minutes of weightlessness which is about 16x more than 90 seconds and it might cost a bit less than $100k, though I don't think NASA sells those commercially.
No Human has ever experienced zero-g weightlessness, and none ever will. There is no part of the universe that is zero g. Gravity on the ISS is almost the same as gravity on Earth (90% of it). Even distant planets experience the gravity of the sun, and the collective gravity of the milky way.
Instead what you have is free fall - that's basically what orbit is, you are falling toward the planet, but moving forward fast enough to keep missing. It sounds like a joke when phrased that way, but it really is what's happening.
Do you wonder what it feels like to float in the space station? It feels like falling. Just constant falling without ever hitting anything. It does NOT feel like floating or flying. I assume the brain eventually gets used to the feeling, but not in 90 seconds.
If you want to experience something at least kinda close to it, go sky diving, which feels like falling with something pressing on whatever part of you is pointed into the wind.
If you want to experience floating, go scuba diving.
If you want to experience flying, go to a sky diving simulator (vertical wind tunnel).