Richard Branson faces shareholder lawsuit over space travel problemsPosted On: Nov. 7, 2022 1:51 PM CST
(Reuters) – A U.S. judge on Monday said British billionaire entrepreneur Richard Branson must face shareholder claims he concealed problems in Virgin Galactic Holdings Inc.’s spaceship program and sold hundreds of millions of dollars of stock at inflated prices.
While dismissing most claims in the proposed class action, U.S. District Judge Allyne Ross in Brooklyn said shareholders could try to prove that Virgin and Mr. Branson defrauded them into overpaying for the space tourism company’s shares, which now trade more than 90% below their February 2021 peak.
Shareholders can sue over July 2019 statements that Virgin had made “great progress” overcoming “hurdles” to commercial spaceflight, despite a near-disastrous test flight five months earlier when its rocket plane Unity suffered critical damage.
Mr. Branson must also defend his July 2021 statement that his own just-completed flight on Unity, where he soared 50 miles above the earth, had been “flawless” though Unity had strayed from its assigned airspace.
In a 55-page decision, Judge Ross said shareholders also could sue over approximately $301 million of stock that Mr. Branson sold the month after the flight.
Lawyers for Virgin and Branson did not immediately respond to requests for comment.
In seeking a dismissal, they said there was no proof of intent to defraud, and that the defendants had thoroughly disclosed safety and design issues in developing commercial space travel, “unquestionably a high-risk proposition.”
Laurence Rosen, a lawyer for the shareholders, declined to comment.
Virgin is based in Tustin, California, and went public in October 2019 by merging with a special purpose acquisition vehicle, Social Capital.
The lawsuit covers shareholders who owned the stock of either from July 10, 2019, to Oct. 14, 2021, when Virgin grounded Unity and delayed its commercial space travel service. Its shares fell 16.8% the next day, to $20.01.