By Carlie Porterfield,
Published by Forbes, 7 November 2022
Billionaire Richard Branson must face a lawsuit filed by Virgin Galactic shareholders who allege Branson hid issues with the space program and sold nine figures worth of stock at inflated prices, a federal judge ruled Monday, marking another hurdle for Branson’s already embattled pursuit of commercial space flight.
While U.S. District Judge Allyne Ross in Brooklyn dismissed most claims brought forward in a proposed class action lawsuit, she said shareholders could bring Branson and Virgin to court and attempt to prove he defrauded them into paying an overinflated price for Virgin Galactic’s shares, which now trade 90% below their 2021 peak according to Reuters, which first reported the story.
Shareholders can sue over Virgin’s statements in July 2019 that the company had made “great progress” in pursuing commercial spaceflight, even though just five months earlier its rocket plane, Unity, was critically damaged during a test flight.
The class can also sue over Branson’s July 2021 statement that his flight on Unity was “flawless” even though the Federal Aviation Administration said the rocket deviated from its intended flight path.
In the month after that flight, Branson sold about $301 million of stock that Ross ruled shareholders can sue over, the ruling states, according to Reuters.
Virgin and Branson’s lawyers unsuccessfully argued for the case to be dismissed and said there’s no proof that there was any intention to defraud shareholders by misleading them, adding that space travel is “unquestionably a high-risk proposition” and that Virgin disclosed safety and design issues, according to Reuters.
The lawsuit applies to shareholders who had stock from July 10, 2019, to Oct. 14, 2021, when Virgin announced it would push back its pursuit of commercial space travel.
Branson founded Virgin Galactic in 2004 but suffered setbacks including a botched testflight in 2014 that killed co-pilot, Michael Alsbury. After more than a decade of being funded largely by Branson’s billion-dollar fortune, Virgin Galactic went public in October 2019 by merging with a special-purpose acquisition company. The company is aiming to offer brief flights to the edge of space to tourists willing to pay for six-figure tickets. Virgin Galactic’s competitors include other companies founded by wealthy businessmen in what has been dubbed a “billionaire space race” between Branson’s Virgin Galactic, Jeff Bezos’ Blue Origin and Elon Musk’s SpaceX. While Virgin Galactic has not launched a flight since Branson’s July 2021 trip on Unity, Blue Origin has sent up six tourist space flights since 2021, and SpaceX has launched two.
We estimate Branson is worth $3.7 billion thanks to his conglomerate of businesses under the “Virgin” brand name, like Virgin Atlantic and Virgin Galactic.
What To Watch For
Branson announced in February that Virgin Galactic will soon start taking reservations for $450,000 tickets for space flights, which he said at the time would begin “later this year,” but now the company aims to launch commercial flights in spring 2023.
Richard Branson must face lawsuit in U.S. over Virgin Galactic space travel problems (Reuters)
Virgin Galactic Shares Surge 30% After Billionaire Branson-Backed Firm Announces $450,000 Tickets To Space (Forbes)
See: Original Article