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. Some of these unforeseen difficulties appear to have materialised, with the company suing its own directors and officers in a shareholder derivative lawsuit for alleged breaches of fiduciary duty.
According to the complaint initiated by shareholders, Virgin Galactic‘s chairman allegedly took unfair advantage of his role to sell 10 million shares for $315 million before unexpectedly quitting the board. It is also alleged that a high profile shareholder of the company pocketed $301 million by capitalising on a period of good news in which to sell stock at a temporarily inflated price.
The space travel company has been struggling as of late, largely as a result of an investigation into potential defects of its spacecraft which have delayed commercial flights until late 2022. According to the United States federal court filing, Virgin Galactic management were allegedly 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, some stakeholders argue that these vehicles are more accurately described as “rudimentary prototypes”, citing a lack of engineering documentation and errors in design.
Originally founded in 2004, Virgin Galactic received regulatory approval to fly customers into space in 2021. Today, the company has stated its intention to commence commercial flights by the end of this year, with a reported waiting list of 750 customers who have placed deposits for a 90 minute return journey priced at the modest sum of $450,000 per ticket.
Featured image by leonelfdez / CC0
