PARIS — Social Capital Hedosophia (SCH), the investment vehicle established by former Facebook executive Chamath Palihapitiya, is purchasing up to 49% of Richard Branson’s Virgin Galactic space tourism company on the assumption that Virgin Galactic will generate $600 million in annual revenue and $272.7 million in EBITDA by 2023.
The transaction, announced July 9, gives Virgin Galactic (VG), which has struggled transform is early promise into regular commercial flights with people on board, an enterprise value of $1.5 billion.
Branson and the other VG investors have put in $1 billion since the company’s inception in 2004. Under the transaction, which will see Virgin Galactic become a publicly traded company, current Virgin Galactic investors will receive $300 million in cash from SCH, plus the equivalent of $1 billion in the form of the VG common stock priced at $10 per share.
Palihapitiya will invest $100 million separately into VG and will become the company’s chairman.
“It is a privilege to partner with Sir Richard Branson, a once-in-a-generation visionary, to bring the reality of commercial spaceflight to the world,” Palihapitiya said in a July 9 statement. “We are confident that VG is light years ahead of the competition. It is backed by an exciting business model and an uncompromising commitment to safety and customer satisfaction. I cannot wait to take my first trip to space and become an astronaut.”
So far, $80 million in deposits from 600+ VG customers and $120 million in potential revenue
VG said it has booked pre-commercial orders from more than 600 customers that have made more than $80 million in deposits and $120 million in potential revenue.
“The Board of VG believes that the additional capital provided by the merger with SCH will provide the company with the support needed to reach commercialization” of its service, the company said in a July 9 statement.
Richard Branson said: “We are on track for our beautiful spaceship to begin commercial service. By embarking on this new chapter, at this advanced point in Virgin Galactic’s development, we can open space to more investors and in doing so, open space to thousands of new astronauts…. I am delighted that SCH has decided to become such an important part of our amazing journey.”
SCH and VG said they expected the transaction to close before the end of this year. SCH is currently trading on the New York Stock Exchange with a market capitalization of $899 million.