Richard Branson is to face a US lawsuit over Virgin Galactic space travel issues | Tech US News

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NEW YORK, Nov 7 (Reuters) – A U.S. judge said on Monday that British billionaire Richard Branson must face shareholder claims that he hid problems in Virgin Galactic Holdings Inc’s ( SPCE.N ) spaceship program and sold hundreds of of millions of dollars in shares at inflated prices.

While dismissing most of the claims in the proposed class action, U.S. District Judge Allyne Ross in Brooklyn said shareholders could try to prove Virgin and Branson defrauded them into overpaying for the space tourism company’s shares, which are now trading higher 90% below the February 2021 peak. .

Shareholders may sue over statements in July 2019 that Virgin had made “great progress” in overcoming “obstacles” to commercial spaceflight, despite a near-disastrous test flight five months earlier when its Unity rocket suffered severe damage.

Branson must also defend his July 2021 statement that his own just-completed flight in Unity, where he soared 50 miles (80.47 km) above the earth, had been “flawless” even though Unity had moved away from the assigned airspace.

In a 55-page decision, Ross said shareholders could also sue for roughly $301 million in shares that Branson sold in the month after the flight.

Attorneys for Virgin and Branson did not immediately respond to requests for comment.

In seeking the dismissal, they said there was no evidence of intent to defraud and that the defendants had thoroughly disclosed the safety and design issues in the development of commercial space travel, “undoubtedly a high-risk proposition.”

Laurence Rosen, a lawyer for the shareholders, declined to comment.

Virgin is headquartered in Tustin, California and went public in October 2019 by merging with a special purpose acquisition vehicle, Social Capital.

The lawsuit covers shareholders who owned anyone’s stock between July 10, 2019, and October 14, 2021, when Virgin grounded Unity and delayed its commercial space travel service. Its shares fell 16.8% the next day to $20.01.

Branson, 72, is worth $3.7 billion, according to Forbes magazine.

Virgin shares were up 5 cents at $4.97 in afternoon trading on Monday.

The case is Kusnier et al v. Virgin Galactic Holdings Inc et al, United States District Court, Eastern District of New York, number 21-03070.

Reporting by Jonathan Stempel in New York Editing by Matthew Lewis

Our Standards: The Thomson Reuters Trust Principles.

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