Virgin Galactic, Richard Branson’s space tourism company, is to go public by merging with the special purpose acquisitions company (SPAC) Social Capital Hedosophia.
Virgin Galactic will raise around $800 million from the listing, according to a spokesman for the company. The company is well suited to the SPAC process, and will benefit from a cash injection while avoiding a potentially time-consuming and damaging IPO process.
The space company will merge with Social Capital Hedosophia, which is listed in New York. The investment firm will have a 49 percent stake in the combined business. Shares in Social Capital Hedosophia were up 2.6 percent in pre-market trading as news of the deal broke.
Virgin Galactic is reportedly close to taking its first passengers to space, and will use the cash injection to take the company through to that point where it can make a profit from rides into the stratosphere. “This transaction represents the next step of our exciting journey. We believe it will offer us the financial flexibility to build a thriving commercial service and invest appropriately for the future,” said George Whiteside, CEO of Virgin Galactic.
By going public via a SPAC, and avoiding the IPO completely, Virgin Galactic can sidestep a costly investor roadshow, and avoid the challenge of selling shares in a company with many risks. The space business is fairly risky, and the company has already suffered one tragedy when a ship broke up during a test flight and killed one pilot. That kind of risk can spook investors on a road show.
The company Virgin Galactic will be merging with, Social Capital Hedosophia, was founded by the Sri-Lank-born billionaire Chamath Palihapitiya, who will also contribute $100 million to the venture and become chairman. SPACs are blank-check companies formed with the purpose of merging or acquiring other companies. Social Capital priced 60 million shares at $10 in September 2017, and under usual SPAC rules had two years to invest the money raised. With a couple of months remaining, Palihapitiya poured the money into Virgin Galactic.
Branson has searched for investment into the company for some time reportedly, and suspended talks over a $1 billion pot of cash from Saudi Arabia after the murder of journalist Jamal Khashoggi.
Virgin Galactic already has a reported 700 customers ready to pay $250,000 each to take the 90-minute flight to the edge of the world’s atmosphere. The space tourists will experience weightlessness and view the curvature of the planet. Branson expects to take the flight himself this year, and customers to follow soon after. The company’s spacecraft has successfully flown a test mission to space already.