In a move that will bring in substantial investment at an optimum time, Sir Richard Branson’s Virgin Galactic is to merge with Social Capital Hedosophia Holdings Corp (SCH), a special purpose acquisitions company.
SCH will hold a 49% stake in the company while Virgin Galactic will retain a 51% stake and the new company plans a stock market listing for the end of the year, making it the first space tourism company to turn to public markets for funding. The company is expected to have a pro forma enterprise value of US$1.5 billion and the majority of investment capital raised will be used to keep the Virgin Galactic program ahead of competitors such as Jeff Bezos’ Blue Origin and Elon Musk’s SpaceX.
According to Virgin Galactic, Chamath Palihapitiya, founder and CEO of Social Capital Hedosophia has agreed to invest an additional US$100 million at US$10.00 per share at completion of the transaction. Palihapitiya will also become the new company chairman, with George T. Whitesides remaining as CEO. The selling equity owners of Virgin Galactic will receive US$1.3 billion in total consideration, inclusive of US$1.0 billion of common stock of the combined company valued at US$10.00 per share and up to US$300 million in cash consideration.
In February this year Virgin Galactic flew its first ‘test passenger’ to the edge of space and to date has over 600 customer reservations, including the likes of Leonardo DiCaprio and Justin Bieber, who have paid deposits totaling approximately US$80 million and representing US$120 million in potential revenue for the US$250,000 90-minute flight. The merger is expected to be completed during the second half of 2019, subject to approval by SCH’s shareholders and other customary closing conditions.
