Richard Branson has joined the crush of high-profile investors seeking to raise money for blank-cheque companies, pitching a $400m vehicle that would hunt for deals to expand Virgin Group’s brand in the US.
The finances of Britain’s best-known billionaire have been strained by Covid-19’s impact on Virgin’s businesses from airlines to gyms, prompting him to suggest in April that he may need to mortgage his home in the British Virgin Islands.
Instead, the group sold more than $500m worth of stock in Virgin Galactic, the space tourism business Sir Richard backed into a blank cheque company founded by Chamath Palihapitiya, former Facebook executive, in 2019. Much of that capital has gone into his airlines, Virgin Atlantic and Virgin Australia.
Such “special purpose acquisition companies”, or Spacs, have found a new following in recent months, despite a record of underperformance, attracting investors including hedge fund billionaire Bill Ackman and Billy Beane, the sports executive.
Virgin declined to comment but a filing with the Securities and Exchange Commission describes the Cayman Islands-registered Spac, VG Acquisition, as looking for deals in the consumer-facing sectors Virgin already knows well, ranging from travel and leisure to financial services and health and wellness.
It has yet to pick a target company or begin deal discussions, the document says, but it argues that the pandemic has created “a rare opportunity to invest in fundamentally strong target businesses at attractive valuations”. The Spac would have two years to spend the $400m it raises or return it.
Spacs are pitched as an alternative to the traditional initial public offering process, which some say is too onerous and uncertain for companies looking to list their shares. Blank cheque vehicles have raised a record amount this year to buy private companies that want a listing on the stock market.
Some Spac executives have promised to address concerns around how the vehicles are structured, which can make them lucrative for sponsors who often receive a 20 per cent stake in the target company after a merger is agreed.
The fundraising for VG Acquisition, underwritten by Credit Suisse, could provide fresh capital for Sir Richard to advance a stalled ambition to expand the Virgin brand in the US.
Recent launches of Virgin Hotels, Virgin Trains USA and Virgin Voyages, a cruise ship company based in Miami, were badly set back by the pandemic, and he has yet to find a partner to launch Virgin Money in the US.
Virgin put more than $1bn into its space ventures but typically invests far smaller sums, and Sir Richard has a record of finding wealthy individuals, private equity partners and sovereign wealth funds to provide much of the capital for his launches. But his finances have come under scrutiny this year after he sought aid from the UK and Australian governments to bail out his ailing airlines.
The IPO filing lists Sir Richard as VG Acquisition’s founder, but the company would be run by two of his top executives: Josh Bayliss, Virgin Group’s chief executive, and Evan Lovell, its chief investment officer.