Stockholder Sues Virgin Galactic for Lying About Flight Tests

Stockholder Sues Virgin Galactic for Lying About Flight Tests

Richard Branson, the 70-year-old Virgin Group founder and CEO of Virgin Galactic, flew the Unity22 test flight in 2021, which was then reportedly derailed.
Photo: Galactic Virgo

Virgin Galactic shareholder takes company executives to task, claiming penchant for covering up major flaws encountered during sound testing Unit spaceplane have reduced investors’ chances of winning big in the commercial space race.

in a new trial filed in Delaware District Court on Monday, shareholder Yousef Abughazaleh claims the spaceflight company, its executives and billionaire founder Richard Branson lied about the quality and safety of its spaceplanes, all in an effort to inflate the company’s stock price and let executives cash in on more than $1.3 billion in common stock. The complaint was filed on behalf of Virgin Galactic Holdings Incorporated.

In the lawsuit, Abughazaleh claims that Virgin Galactic, along with its executives, caused the company to “misrepresent and conceal significant incidents and setbacks during the test flights.” The defendants “hidden this information in order to enter the public markets” and “sold hundreds of millions of dollars worth of Virgin Galactic stock before” the company’s deficiencies were revealed. The word finally got out, sparking the company’s ‘stock price’ [to] decrease significantly,” the lawsuit states.

The entire 52-page lawsuit reads like a long history of every supposed failure of Virgin Galactic, since its 2007 rocket engine explosion which killed three workers, to the failed 2014 SpaceShipTwo test flight that killed a pilot and injured a co-pilot (though the National Transportation Safety Board blamed the tragedy on pilot error). However, the costume itself depends on the company’s 2019 and 2021 years. Unit suborbital spaceplane flights, and whether the company concealed several system failures from public view.

Last November, a federal judge opened the door for shareholders to lash out at the company for statements made in 2019 and 2021 about how it was making “great progress” on its commercial spaceflight program. The company originally claimed that its February 2019 launch of its SpaceShipTwo VSS Unit was a hit. That same year, journalist Nicholas Schmidle writing that one of the suborbital spacecraft’s stabilizers malfunctioned, according to Unitthen test pilot and former vice president of company safety.

In 2021, Branson touted the success of his 50 mile flight aboard his Virgin Galactic Unit rocket plane this was to further the company’s goal of creating a luxury experience for suborbital travelers. Shortly after the flight, Schmidle published a scathing article in The New Yorker, prompting the Federal Aviation Administration to intervene and investigate this launch, which saw major issues This flew outside their assigned airspace.

Branson has been called out for his bombastic ways, such as when reports showed he simulated the promotional bike ride he would have taken the botched flight of 2021. The FAA ends up SpaceShipTwo flights allowed resume, but only after Virgin Galactic has completed the prescribed corrective actions. That said, the company’s stock price has been falling steadily since mid-2021, and Virgin Galactic hasn’t performed a suborbital launch since Branson went into space. At the end of 2022, the company’s stock price was down more than 90% below its February 2021 high. The company’s stock price is still far from those highs at the time of writing the report.

The shareholder is asking the courts to compel executives to reinvest millions of dollars from stock sales back into the company, and to better communicate company failures.

“We believe the allegations are without merit and we guarantee the safety of our vehicles,” a Virgin Galactic spokesperson told Gizmodo in an emailed statement. “We will vigorously defend ourselves in the appropriate forum.”

Virgin Galactic finally lands its spaceplane launcher, the VMS Day before, back in the air for a test flight on Wednesday. The return of the 2008 carrier ship did a little to help the company’s struggling share price, but that still wasn’t enough to overcome the many other challenges Branson’s other space ventures have recently faced. Virgin Orbit, which focuses on satellite launches, experienced cash flow problems since the end of last year. Last month, Virgin Orbit’s LauncherOne rocket which was to deploy several satellites into low orbit crashed to earth. The company blamed a faulty filter for the failed launch.

Virgin Galactic is set to report fourth quarter and full year 2022 results February 28.