By Bharath ManjeshR
(Reuters) – Shares of Richard Branson-backed Virgin Galactic Holdings Inc
The company was created from the merger between British billionaire Branson’s Virgin Galactic and former Facebook executive Chamath Palihapitiya’s publicly traded shell company, which has invested $800 million for a 49% stake.
Merging with an already public company allowed Branson’s space venture to sidestep the traditional initial public offering process, including filing extensive paperwork with the U.S. SEC.
Virgin Galactic’s stock market splash comes during a particular bruising period for debuts by private firms and startups, with unproven business models.
WeWork’s IPO, which was billed as the most high-profile public debut of the year, was scrapped after investors raised concerns over its burgeoning losses and poor corporate governance, while debuts of others such as Peloton Interactive Inc
“This is a shaky environment for companies with grand visions but unproven models” said Matthew Kennedy, senior IPO market strategist at Renaissance Capital.
Branson, with a 51% stake, retains control of the company which had a market cap of $2.3 billion following the announcement of the merger completion on Friday. Palihapitiya is chairman of the combined company.
Branson is racing against competitors Blue Origin, the space business of Amazon.com Inc
Hundreds of people from 60 countries, including actor Leonardo DiCaprio and pop star Justin Bieber, have paid or put down deposits to fly on one of Virgin’s suborbital flights.
Some of Virgin Galactic’s ticket holders have been waiting over 14 years for their trip. A 90-minute flight, which allows passengers to experience a few minutes of weightlessness, costs about $250,000.
Virgin’s current reservations represent about $80 million in total collected deposits and $120 million of potential revenue.
Earlier this month, the company announced space-wear for passengers developed in collaboration with sportswear maker Under Armour Inc
The stock rose to as much as $12.93 after opening at $12.01.
(Reporting by Bharath Manjesh in Bengaluru; Editing by Bernard Orr and Shailesh Kuber)