Virgin Galactic Plans To Go Public Through An $800 Million Deal With Social Capital Hedosophia

By Amit Chowdhry ● July 10, 2019
  • Spaceflight company Virgin Galactic announced it is going public as part of an $800 million deal with Chamath Palihapitiya’s Social Capital Hedosophia

Virgin Galactic — the spaceflight company within the Virgin Group founded by billionaire Richard Branson — has made a deal with a venture capital firm founded by Chamath Palihapitiya (an early senior executive at Facebook) to make it the first publicly traded space tourism company. As part of the deal, Palihapitiya’s Social Capital Hedosophia (SCH) is going to invest $800 million for a 49% stake in the merged company split between SCH’s public stockholders and Palihapitiya according to Forbes.

The stakeholders in Virgin Galactic — which includes Virgin Group and Mubadala Investment Ltd (investment vehicle for the government of Abu Dhabi) — will retain a 51% share of the company. And once the deal closes in the second half of 2019, the combined companies are going to trade under Virgin Galactic’s name on the New York Stock Exchange.

The management team at Virgin Galactic is going to stay the same. For example, George Whitesides will retain the CEO position and former Twitter COO Adam Bain (stakeholder in SCH) will be joining the board.

Virgin Orbit — a spin-off company that was founded in 2017 and sets up small satellite launches — is going to remain part of Virgin Group so it will not be impacted by this merger.

Palihapitiya had set up Social Capital Hedosophia as a special-purpose acquisition company (SPAC) in 2017 at an opening share price of $10, according to Alex Knapp at Forbes. Around the time it launched, Palihapitiya told TechCrunch that the traditional IPO model for tech startups was broken and he wanted to set up an alternative model.

Currently, Social Capital Hedosophia is valued at nearly $1 billion on the NYSE. And Virgin Galactic raised around $1 billion in funding prior to this deal, according to Pitchbook. This merger will provide the capital that is necessary for Virgin Galactic to commercialize its space tourism services.

“By embarking on this new chapter, at this advanced point in Virgin Galactic’s development, we can open space to more investors and in doing so, open space to thousands of new astronauts,” said Branson in a statement. “We are at the dawn of a new space age, with huge potential to improve and sustain life on Earth.”

Virgin Galactic currently has reservations for space tourist flights from over 600 people and it collected around $80 million worth of deposits. These reservations add up to around $120 million in potential revenue for Virgin Galactic ($250,000 per ticket).

Virgin Galactic already has a license for space launches from the FAA. And Virgin Galactic’s space tourism flights are going to take off from the New Mexico Spaceport. Revenue that is expected for Virgin Galactic should hit around $600 million by 2023.

Virgin Galatic’s largest rivals are Blue Origin and SpaceX. Blue Origin was founded by Amazon founder Jeff Bezos. And SpaceX was founded by Tesla Motors CEO Elon Musk.

And Virgin Galactic has already conducted multiple test flights of the SpaceShipTwo suborbital spaceplanes. And the company also made it to the edge of space with the VSS Unity flying 51.3 miles above Earth with two human pilots late last year.

Credit Suisse was the capital markets advisor and Skadden, Arps, Slate, Meagher & Flom LLP acted as legal advisor to SCH. And M Klein and Company served as financial advisor to VG and Virgin Group for the merger with SCH. LionTree Advisors and Perella Weinberg Partners worked as financial advisors to Virgin over capital raising alternatives. Plus Latham & Watkins LLP acted as Virgin’s legal advisor.

The merged company is expected to have an anticipated initial enterprise value of $1.5 billion.

Skadden’s team included Howard Ellin (partner), Christopher Barlow (partner), Stuart Levi (partner), Alexandria Robertson (associate), Sean Coburn (associate), Bruce Goldner (partner), Cristina Vasile (associate), Victor Hollender (partner), Abigail Friedman (tax associate), Gregg Noel (corporate partner), Jonathan Ko (VP), Robert Goldstein (associate), Ivan Schlager (partner), Daniel Gerkin (counsel), and Michelle Weinbaum (associate).

And Latham’s team included Justin G. Hamill (partner), Josh Dubofsky (partner), Charles K. Ruck (partner), Daniel Breslin (associate), Nima J. Movahedi (associate), Matthew Bedrossian (associate), Daniel Weissman (associate), Shannon Cheng (associate), Gregory Van Buiten (associate), and Andria Varnavides (associate). Plus advice was provided by Anthony Klein (partner), Morgan Brubaker (associate), Brian Umanoff, Shayne Kennedy (partner), Drew Capurro (associate), Michelle Carpenter (associate), Pardis Zomorodi (partner), Lisa Watts (partner), Kathryn Harrington (associate), Janet Hsu, Chris Norton (partner), Les Carnegie (partner), and Dean Baxtresser (associate).