Virgin Galactic rolled out its newest spaceship Tuesday, March 30, 2021, as the company looks to resume test flights in the coming months.
Las Cruces Sun-News
LAS CRUCES – Virgin Galactic is facing a prospective class-action lawsuit by investors, alleging the company made false and misleading reports about its finances and accounting.
The federal complaint, filed in New York’s Eastern District, states that Virgin Galactic’s stock prices dipped by 9 percent after the company announced on April 30 that it would need to restate its financial results for the first quarter of 2021.
The aerospace company and anchor tenant for New Mexico’s Spaceport America said the restatement was due to guidance issued by the Securities and Exchange Commission on April 12 pertaining to special purpose acquisition, known as SPACs, including Virgin Galactic.
Virgin Galactic’s VSS Unity releases from VMS Eve and then ignites into space over Spaceport America, New Mexico, on Saturday, May 22, 2021. (Photo: Virgin Galactic)
SPACs have also been called “blank check” companies: Entities with no commercial operations that are formed in order to raise capital through an initial public offering and acquire an existing company.
More: Virgin Galactic inks deal for research flights with science author Kellie Gerardi
This was how, in October 2019, Virgin Galactic merged with Social Capital Hedosophia to launch Virgin Galactic Holdings as a public company.
Initial investors in SPACs purchase units, which may combine stock shares with warrants, described in the complaint as “instruments that allow investors to buy additional shares at a fixed price.”
The SEC announced that, in some circumstances, warrants should be accounted as liabilities instead of part of a company’s equity.
In a publicity photo, Virgin Galactic’s former CEO George Whitesides, left, appeared with incoming CEO Michael Colglazier. Both are named in a federal lawsuit over the company’s accounting and financial reporting. (Photo: Virgin Galactic)
Days later, Virgin said it would restate its consolidated financial statements due to the accounting of outstanding warrants of Social Capital Hedosophia at the time of the merger. As of April 30, the company reported approximately 2.7 million warrants were outstanding.
For subscribers: After test flight, different views of Spaceport America’s future
Other companies have restated their finances following the new guidance, but this is the first litigation to arise from it.
Investor Shane Levin and other unnamed plaintiffs claim in their complaint that Virgin Galatic CEO Michael Colglazier, former CEO George Whitesides, CFO Doug Ahrens and former CFO Jon Campagna knowingly presented incorrect financial statements to inflate the company’s stock price and entice buyers.
The lawsuit is seeking class-action status and unspecified damages, in addition to legal fees.
From left, Virgin Galactic founder Richard Branson, former New Mexico Gov. Bill Richardson and current Gov. Michelle Lujan Grisham at New Mexico’s Spaceport America on Saturday, May 22, 2021. (Photo: Courtesy of Bill Richardson)
The company has not yet filed a response to the complaint. The Sun-News reached out to Virgin Galactic for comment, but received no response.
More:Virgin Galactic touches space over New Mexico
The historically volatile stock entered a downward trend in the days after Virgin Galactic announced the restatement, hitting a low for 2021 of $15.50 a share on May 13.
Since then, the price has been on the increase, sloping upward sharply after the company’s May 22 successful test flight to space, closing last week at $31.38 per share.
Algernon D’Ammassa can be reached at 575-541-5451, [email protected] or @AlgernonWrites on Twitter.
Keep reading:
Read or Share this story: https://www.lcsun-news.com/story/news/local/spaceport/2021/06/07/investors-sue-virgin-galactic-holdings-over-financial-restatement/7552430002/
More Stories
Wix Evaluate 2020
Make All Your Insurance Straightforward
Purchase Excessive Quality Backlinks