Wow, OK, let’s start the day off with a bang. Two years ago, I wrote about Social Capital’s Chamath Palihapitiya’s lofty goal of helping billion-dollar startups get liquid sooner.
At the time, he had raised $600 million in an IPO for his
blank check company, Social Capital Hedosophia Holdings. The idea was that
Social Capital Hedosophia would acquire a big tech company and help it
circumvent the initial public offering process.
The process for a tech company valued at more than $1
billion to go public is long and distracting, Palihapitiya
told me at the time. It involves conducting an investor roadshow and
working with bankers, who often charge significant fees. Social Capital
Hedosophia would offer faster liquidity for investors and employees, waive
lock-ups, and trim the timeline of “going public” to roughly 60 to 90 days.
Social Capital Hedosophia has been trading on the New York Stock Exchange since September 2017, and it just completed its first transaction.
The special-purpose acquisition company (SPAC) is planning
to invest roughly $800 million in Virgin Galactic for a 49% stake, according
to The Wall Street Journal.The combined firm will have an
enterprise value of $1.5
As part of the deal with Social Capital Hedosophia, Virgin
Galactic would become the first publicly listed human-spaceflight company.
Virgin Galactic expects that the deal will give it the capital necessary to
fund the business until its spaceships can commercially operate and turn a
profit. Virgin Galactic has already raised more than $1 billion since it was
founded in 2004 — the funds coming mostly from Virgin Group founder
“By taking Virgin Galactic public, at this advanced point in
its development, we can open space to more investors and in doing so, open
space to thousands of new astronauts,” Branson said in a statement.
So wait, how did Branson end up doing business with
Palihapitiya? I’ve interviewed both, and their unbridled ambitions are no
secret. What’s interesting here is that Branson was in talks with Saudi
Arabia’s Public Investment Fund for a $1 billion investment in his company, but
Branson suspended the plans following the murder of journalist Jamal Khashoggi
at a Saudi consulate. Branson then met with Palihapitiya and his team about a
potential investment through the SPAC.
The duo and their teams have been fully focused on this for the last nine months, Palihapitiya told Term Sheet this morning. He added, “Not only is it going to be the first public space tourism company, but the things they are building are revolutionary. It is an incredibly compelling business.”
Palihapitiya is also investing $100 million of his personal money, and he will serve as the chairman of the company.
Virgin Galactic is in competition with rivals Jeff Bezos’
Blue Origin and Elon Musk’s SpaceX. I asked Branson about
his competitors in 2016. While Elon Musk’s SpaceX focuses on launching
satellites and transporting humans to Mars, Branson said he doesn’t necessarily
see him as a direct competitor. “I suppose I see [Musk] as a younger version of
myself,” he says. As for Bezos? “The public will have to decide which vehicle
they’d rather go to space in,” Branson said of Virgin Galactic and its
competitor, Blue Origin. “Both of us will be striving to be better than the
other, and we’ll see who pulls that off.”