Virgin Galactic Shareholder Lawsuit Overview:
- Who: Richard Branson and Virgin Galactic executives are facing a lawsuit filed by shareholders.
- Why: The shareholders say Branson concealed significant issues with the spacecraft and sold a significant number of shares while the stock price was “artificially inflated.”
- Where: The Virgin Galactic shareholder lawsuit was filed in New York federal court.
A group of Virgin Galactic shareholders have sued Sir Richard Branson, claiming the 71-year-old concealed problems with his rockets and sold off £346 million in shares while the stock price was “artificially inflated.”
The prototype designs for Virgin Galactic’s Unity spacecraft and Eve mothership were “severely flawed,” the Daily Mail wrote, quoting the Virgin Galactic shareholder lawsuit.
“In fact, the prototypes were not meant to be taken into the air,” the lawsuit alleges. “Rather, they were meant to provide a starting design point for the company to create its own commercial-grade vehicle that was safe and flightworthy – two things Eve and Unity certainly were not.”
The Virgin Galactic shareholders allege that Branson’s rockets “were not designed for commercial purposes” and that cracks appeared after every flight. They also claim that the spaceships were not properly maintained.
Last year’s highly anticipated Virgin Galactic space launch did not go off without a hitch, the shareholders claim. The spacecraft were reportedly damaged during the flight, and cracks were discovered “in key locations on the vehicles.”
Virgin Galactic Shareholders Point to History of Spacecraft Problems
The Virgin Galactic shareholders claim that Branson’s rockets have had a number of problems over the years, putting crews at risk of injury and death. They say that Virgin Galactic’s first spaceship, the VSS Enterprise, endured a mid-flight disaster in October 2014. The pilot was severely injured, and the co-pilot was killed in the incident, the Virgin Galactic shareholder lawsuit says.
Virgin Galactic also allegedly concealed severe damage to VSS Unity that occurred during a February 2019 test flight.
The “entire crew was almost killed due to a mechanical issue caused by human error, but this went undisclosed at the time,” according to the lawsuit.
Shareholders Accuse Branson of Selling ‘Artificially Inflated’ Virgin Galactic Stock
Branson founded Virgin Galactic in 2004 with the goal of making space tourism possible by 2009. Around 600 people have reportedly paid deposits for flights on Virgin Atlantic spacecraft. The price for Virgin Galactic space travel is £340,000 per seat, and the flight reportedly lasts up to three hours.
When Virgin Galactic went public in October 2019, the company was not as valuable as it seemed because the company concealed significant issues with its spacecraft, the lawsuit claims. The shareholders allege that Virgin Galactic is investigating materials used in the spacecraft joints due to a “reduction in strength” that was demonstrated during testing.
Branson reportedly sold 16 million shares of Virgin Galactic stock for approximately £346 million between Apr. 12 and Aug. 12 last year, the shareholders allege. They claim he has sold around £760 million in Virgin Galactic shares since 2020.
The shareholder lawsuit was filed on behalf of Virgin Galactic shareholders in New York federal court. It asserts claims for breach of fiduciary duty, gross mismanagement, abuse of control, waste of corporate assets, unjust enrichment and violations of the Securities Exchange Act.
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