When Virgin Galactic listed on the on the New York Stock Exchange in 2019, its management did not likely envisage the extent of the challenges they lay before them. However, some of these apparent difficulties have come to fruition, with the company recently suing its own directors and officers in a shareholder derivative lawsuit for alleged breaches of fiduciary duty.
According to the claim instigated by shareholders, Virgin Galactic‘s chairman, Chamatha Palihapitiya, allegedly took advantage of his role to sell 10 million shares for $315 million before abruptly quitting the board. It is also alleged that the company’s founder, Richard Branson, pocketed $301 million by capitalising on a period of good news in which to sell.
The space travel company has been struggling as of late, largely as a result of an investigation into potential defects of its spacecraft; delaying commercial flights until late 2022. According to the complaint filed in a federal court, Virgin Galactic management were aware of these potential defects for up to three years prior to their public disclosure.
Unfortunately, it is not the first time that Virgin Galactic executives have been accused of misleading investors. While the company has promoted successful flights of its Eve and Unity spacecraft, the claimants argue that these vehicles are better described as “rudimentary prototypes”, citing a lack of key engineering documentation and material design errors.
Originally founded by Richard Branson 2004, Virgin Galactic received regulatory approval to fly customers into space in 2021. Today, the company claims it is on track to commence commercial flights by the end of 2022, with a reported waiting list of 750 customers who have placed deposits for tickets priced at $450,000 for a 90 minute return journey.