Virgin Galactic Shareholder Suit Names Richard Branson, Chamath Palihapitiya. The Stock Is Slumping.
Chamath Palihapitiya, former chair of Virgin Galactic
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A shareholder lawsuit accuses Virgin Galactic founder Sir Richard Branson and former board chair Chamath Palihapitiya of insider trading in company shares. The suit might be making investors nervous.
Virgin Galactic (ticker: SPCE) stock is down 8.9%, while the S&P 500 and Dow Jones Industrial Average were down 0.6% and 0.3%, respectively.
The suit, filed on March 1, alleges several insiders, including Branson and Palihapitiya, sold stock in the space-tourism start-up even though they were aware that some of the company’s ships faced durability issues that hadn’t been disclosed publicly.
Virgin Galactic didn’t respond to a request for comment about the suit.
The durability issues, disclosed in October 2021, pushed back Virgin Galactic’s start of commercial service and have impacted the company’s share price.
Virgin Galactic stock was roughly $24 a share before problems came to light. Shares fell almost 17% on Oct. 15, the trading day following disclosure. Virgin Galactic stock closed at $9.42 a share Monday, down about 60% from mid-October levels. The Nasdaq Composite Index has slipped about 7% over the same span.
Branson still holds about 31 million, or 12%, of Virgin Galactic stock through Virgin Investment Limited, but that’s down from more than 62 million shares entering 2021.
Palihapitiya holds more than 3.7 million shares in Virgin Galactic. He held 10 million at the start of 2020, exited his position in the first quarter of 2021 and bough more stock in the third quarter of 2021, according to Bloomberg data.
Palihapitiya was the head of the special purpose acquisition company, or SPAC, that merged with Virgin Galactic in 2019. The deal, essentially, made Virgin Galactic a publicly traded company. He stepped down as board chair in February.
Write to Al Root at [email protected]
