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Richard Branson sheds majority stake in Virgin Galactic to prop up Virgin Atlantic

·2 min read
Sir Richard's Virgin Galactic went public last year - Reuters
Sir Richard's Virgin Galactic went public last year - Reuters

Sir Richard Branson is to lose control of his decades-long project to send tourists into space to prop up Virgin’s ailing travel businesses.

Virgin Galactic, the American space venture 55pc owned by Sir Richard, said on Monday that the British billionaire would sell around $500m (£405m) worth of shares.

His Virgin Group plans to use the funds to “support its portfolio of global leisure, holiday and travel businesses that have been affected by the unprecedented impact of Covid-19”, according to a US filing.

The sale comes after Sir Richard failed to secure a £500m Government bail-out for Virgin Atlantic, which faces potential administration due to the near-total shutdown of air travel caused by the pandemic. 

Virgin Atlantic, which is 51pc owned by Virgin Group, has turned to seeking funding from outside investors after its co-owner Delta Airlines said it would not contribute to a bail-out. 

Virgin Atlantic timeline
Virgin Atlantic timeline

Although all options are being explored it is believed that the preferred rescue option could be made up of a combination of a cash injection from Sir Richard's Virgin Group alongside outside investors and public funds.

The sale of 25m shares would see Sir Richard’s stake in Virgin Galactic fall to below 43pc, meaning he would lose majority ownership of the company, which went public last year in a merger with Social Capital Hedosophia, a Silicon Valley investment vehicle.

Virgin Galactic has been a long-term passion project for Sir Richard, who first proposed sending tourists into space in the 1990s but has faced multiple setbacks, including the death of a pilot on a test flight in 2014.

The California-based company has said it plans to send the billionaire into sub-orbital space this year, ahead of regular tourist flights, which cost around $250,000 a ticket.

Technology intelligence - newsletter promo - EOA
Technology intelligence - newsletter promo - EOA

Virgin Galactic’s shares traded at $20.16 in New York before the announcement was made, making the proposed sale worth $504m, but fell by 3.6pc following the news, putting the likely proceeds at around $486m.

Last week Virgin Atlantic said it would pull out of Gatwick Airport and cut 3,150 jobs, roughly a third of its workforce, in an attempt to cut costs. The company is particularly exposed to the virus as long-haul flights have been the worst affected in the sector, and are likely to take the longest to recover. 

Virgin Australia fell into voluntary administration last month, and Sir Richard’s cruises, hotels and holidays businesses are also being hit by the pandemic. In March, Sir Richard said he would personally put $250m into Virgin Group.