Branson Looks to Unprofitable Virgin Galactic to Help Save Reeling Empire

Richard Branson celebrates the first Virgin Galactic trade on the New York Stock Exchange. (Credit Virgin Galactic)

by Douglas Messier
Managing Editor

For nearly 16 years, Richard Branson’s obsession with space travel has been massive money pit for the billionaire’s Virgin Group. Branson’s conglomerate has poured more than $1 billion into Virgin Galactic, Virgin Orbit and The Spaceship Company without launching a single tourist or satellite into space while generating minuscule revenues and not a single penny of profit.

And yet, by the strange workings of modern finances, this money losing effort will be helping to prop up the Virgin Group, which has been laid low financially by the global COVID-19 pandemic.

Media reports say Branson will sell up to $504.5 million of his stake in Virgin Galactic. That represents about 22 percent of his shares in the publicly-traded company.

Virgin Galactic went public in October after selling nearly half of itself to Social Capital Hedosophia (SCH) in a reverse merger. SCH was an investment vehicle that was already publicly traded on the New York Stock Exchange. It trades as Virgin Galactic under the symbol SPCE.

Branson’s Virgin Group. which is heavily focused on travel, has been hit hard by the pandemic. Branson had to postpone the launch of his latest venture, Voyage Voyages, which is offering vacations aboard a brand new cruise ship.

Virgin Australia airline went into voluntary administration in April. An independent administrator is seeking potential buyers for the insolvent airline.

The airline had sought an AUS $1.4 billion (US $908 million) bailout from the Australian government. However, officials refused to bail out the unprofitable, deeply indebted airline.

Branson’s request for a £500 ($617 million) loan from the British government to help bail out Virgin Atlantic Airways also came to naught. The company, which has also struggled with profitability, subsequently laid off 3,000 employees.

Although airlines around the world have received government assistance, the ways Branson has structured his business empire and residency have been working against him.

Virgin owns only 10 percent of Australian airline. Four other partners located outside of country own the rest of the company.

Virgin Australia has been only intermittently profitable and was already struggling with a high debt load of AUS $5 billion (US $3.24 billion) before the pandemic broke out. Decision making was slowed down by having five owners.

Virgin Atlantic is 51 percent owned by Virgin and 49 percent by Delta Airlines of the United States. Delta is receiving bailout funding from the U.S. government, which doesn’t want to see it used to prop up UK-based Virgin Atlantic.

Branson’s appeals for government funding have been widely mocked in public. Critics point out that he is a billionaire worth an estimated $4.5 billion who lives on his own private island in the tax haven known as the British Virgin Islands (BVI).

The Virgin Group is set up as a series of trusts and off-shore companies designed to reduce taxes while funding money to BVI for the benefit of Branson and his family. Branson hasn’t personally paid taxes in his native Britain in 14 years.

Branson has protested that he didn’t move to BVI to avoid taxes. However, those claims have fallen largely on deaf ears in a world where millions have lost their jobs and about 285,000 have lost their lives.

Comments Branson made during the economic crisis of 2009 have also come back to haunt the billionaire.

He said that the British government should not bail out struggling British Airways. Instead, the company should go bankrupt so that competitors like Virgin Atlantic could come in and provide better service.

The Australian government followed that advice. The British government thus far has not come to the rescue of Virgin Atlantic.