In a sign that the age of commercial space travel might be rapidly approaching, Virgin Galactic, the company set up by Richard Branson with a plan to do exactly that, has announced plans for a stock market listing. The public listing will not take place through an IPO but as a result of a merger with an already listed ‘cash shell’ company established by Chamath Palihapitiya. Palihapitiya founded the cash shell, called Social Capital Hedosophia, with a view to allowing a privately owned technology company, to be selected at a later date, to go public without the need to run an IPO.
It’s now been decided that Virgin Galactic will be that company and the two will merge, keeping the cash shell’s listing. Virgin Galactic will also receive the $800 million held in the shell as funding for its goal of regularly taking paying passengers into space. The shell, launched in 2017, is listed on the New York Stock Exchange.
Virgin Galactic have said that the company will have an enterprise value of around $1.5 billion, and Social Capital Hedosophia will receive a 49% stake in the merged company. Mr Branson commented on the announcement:
“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.”
For his own part, Mr Palihapitiya explained his interest as motivated by the belief that Virgin Galactic has the potential to bring space travel into the commercial world as well as disrupt the conventional long haul flight industry. He also feels that there are many similarities between Virgin Galactic and the kind of digital product companies he probably initially had in mind when he set out to find the right ‘tech’ company to merge his cash shell with. He commented on Tuesday:
“Under the hood this is just like a software business. Despite it making hardware it has innovated as much as a tech company. Long term, the technology developed by Virgin Galactic could be used to transform air travel by reducing the time of travel.”
Cash shells are only allowed to remain listed on a public stock exchange for a limited period of time and Social Capital Hedosophia would have been obliged to return the $700 million it raised from investors in September if it hadn’t found a suitable company to merge with. $300 million will be made as a direct payment to Virgin Galactic’s existing shareholders for the 49% stake in the merged entity. The remaining $400 million, plus another $100 million cash injection from Mr Palihaptiya, will go onto the new merged company’s balance sheet to fund its journey towards commercial viability. Mr Palihaptiya will also become chairman of the new company.
The immediate target has been announced as manufacturing more spaceships and ‘mother ships’ so that Virgin Galactic can meet expected demand. The company believes the increased capacity this will offer will allow the company to achieve profitability by as early as 2021.
A Virgin Galactic spaceship reached the edge of space for the first time during a test flight in December last year. Progress would have been expected to have been faster if it were not for the 2014 accident that led to the death of one of the company’s pilots. Other companies racing for a piece of what many believe will be a multi-billion dollar industry are Elon Musk’s SpaceX and Jeff Bezos’s Blue Origin in what appears to be becoming a battle between the world’s ‘super entrepreneurs’.