Bank of America Rips Virgin Galactic for Failure to Disclose Out of Airspace Mishap on Richard Branson Flight
Editor’s Note, Sept. 26: 2021: Story updated to reflect that Richard Branson began selling $300 million worth of Virgin Galactic shares on Aug. 10 the day before the FAA notified the company of a mishap during the July flight that carried the billionaire to space. The sale continued through Aug. 12.
by Douglas Messier
Managing Editor
Analysts at Bank of America who cover Virgin Galactic’s publicly-traded stock are not amused by the company’s failure to disclose that a SpaceShipTwo suborbital flight carrying founder Richard Branson flew outside of its assigned airspace on July 11, resulting in an investigation by the Federal Aviation Administration (FAA) and the grounding of the company’s only operational space plane.
“Point blank, in our view, it is unacceptable to have an event during a flight that, per FAA regulations, is considered a mishap and then claim that the mission was a full success,” analyst Ronald Epstein wrote in a note to investors. “The old adage, it’s easier to ask for forgiveness than permission, generally is a poor strategy in aviation.”
The Virgin Group and Branson sold a combined $800 million worth of stock during a seven week period when shareholders were in the dark about the incident and subsequent actions. The news was only revealed by an article in The New Yorker published on Sept. 1.
During a celebratory press conference following his suborbital spaceflight two months ago, Richard Branson waxed poetically about how great the the flight had been before throwing it over to pilot David Mackay to explain how the mission went from the flight deck.
Mackay didn’t answer. Instead, Virgin Galactic President of Space Missions and Safety Mike Moses jumped in to say the flight went great, the only exception being some drop outs in the video showing Branson and three company employees unbuckling from their seats and floating around happily in microgravity. Those transmission drop outs had nothing to do with the safety of the flight.
It all sounded great. Only it wasn’t true.
According to The New Yorker story, Mackay and fellow pilot Mike Masucci got a red light in the SpaceShipTwo VSS Unity cockpit during powered ascent indicating they were off course. Instead of shutting down the engine and aborting the flight as the author’s unnamed sources said they should have done, the pilots let the engine continue to burn to completion. During descent, VSS Unity strayed outside of its assigned airspace for 1 minute 41 seconds into what is known as Class A airspace, which is largely used by jets.
In the seven weeks that followed, it was business as usual for Virgin Galactic and its largest shareholder, Branson, while shareholders and media remained in the dark about the true story.
July 12: Virgin Galactic files to sell $500 million worth of common stock to the public.
July 12: Branson begins making the rounds of various media outlets taking about how great the flight had been.
July 23: The Federal Aviation Administration (FAA) begins an investigation into the incident.
Aug. 5: Virgin Galactic officials disclose nothing about the anomaly or FAA investigation during an earnings call. Parabolic Arc could find no mention of these matters in documents related to the earnings report or anything else filed with the Securities and Exchange Commission (SEC).
Aug. 10: Branson begins to sell $300 million worth of Virgin Galactic shares owned by himself and various Virgin Group companies. The sale will continue for the next two days.
Aug. 11: The FAA declares a mishap, grounds VSS Unity and directs Virgin Galactic to begin an investigation under agency supervision. The spacecraft is grounded until the investigation is completed and the FAA signs off on it.
Aug. 12: Branson completes sale of $300 million worth of Virgin Galactic shares. Branson and companies he controls have sold about $1 billion in Virgin Galactic stock since the company went public in October 2019.
Sept. 1: The New Yorker publishes its story.
Sept. 2: The FAA reveals that VSS Unity is grounded until further notice.
A Virgin Group spokesperson told Parabolic Arc last week that neither Branson nor the Virgin Group knew about the errand flight path, the investigations or the grounding of VSS Unity when the stock sale was announced two days after the FAA made its judgment.
SEC regulations make it illegal to profit from material inside information that could affect the stock price but has not been disclosed publicly.
Virgin Galactic has disputed what it called “misleading characterizations and conclusions” about the seriousness of the mishap in The New Yorker story. At no time during the flight were the pilots, passengers or anyone on the ground in any danger, the company insisted. The statement blamed stronger than expected high altitude winds for pushing the ship off course, and said the pilots reacted as they had been trained. The company has disputed that the pilots should have shut off the engine and aborted the flight.
The day after the story was published, Virgin Galactic announces a late September-early October launch window for VSS Unity‘s next flight test. That prompted a statement from the FAA that the ship was grounded until the investigation was completed.
Parabolic Arc asked Virgin Galactic last week why it failed to disclose information about the mishap, investigations and grounding. The company responded earlier this week asking if it could provide information on background.
I said no. I felt the incident, the FAA’s investigation, and Virgin Galactic’s subsequent actions (and lack thereof) were too serious to allow them to simply comment on background. It would be a disservice to my readers. It would be a disservice to the shareholders who have put their hard earned money and their trust in the company. They could answer the questions if they chose to do so. Or I could explain exactly which questions they refused to answer.
I’ll let everyone know what they decided to do when I hear back from them.
22 responses to “Bank of America Rips Virgin Galactic for Failure to Disclose Out of Airspace Mishap on Richard Branson Flight”
Leave a Reply
You must be logged in to post a comment.
At no time during the flight were the pilots, passengers or anyone on the ground or in the air in any danger, the company insisted. The statement blamed stronger than expected high altitude winds for pushing the ship off course, and said the pilots reacted as they had been trained.”
this is almost a triggered statement. ie it has all the buzz words and phrases in it, but says really nothing.
nor are any of those explanations that any one especially the FAA will likely buy. its sort of like “OK I went into the TFR but no one was hurt and I was not a safety threat”
what is at issue here, at least I have gone over on this board before. but these are pretty serious errors and so far no one has really provided any “soothing words” for them. no I would not handle this on background…they really need to come out and explain it…after they do this for the FAA
Sir Richard Branson has been in the process of cashing out since Virgin Galactic became a public company, so this should be no surprise. He is desperate for money to save all the other Virgin travel brands being hammered by the pandemic.
You also really have to wonder if he had any clue they had flown outside the airspace allowed, although he is responsible legally for knowing it. He really hasn’t used Virgin Galactic for anything but publicity for other Virgin brands.
Branson and snakeoil salesman Chamath Palihalpitiya. They left the buy-high-sell-low retail shareholders holding the heavy bags.
Yes, but that was the case since VG went public. It was always about cashing out of a badly managed venture, badly managed because Virgin Galactic never understood what their real market was.
VG basically violated what has been the successful Virgin strategy, focus promoting the Virgin brand while letting others deliver the product you are selling. Instead Sir Richard Brandon got bogged down trying to deliver the product instead.
They went public projecting commercial flights in June 2020 even though VSS Unity couldn’t even fly because it had been damaged in the February 2019 suborbital flight. They couldn’t complete the flight test program and begin flights by then. No disclosure of that fact to anyone.
I also understand via a review on GlassDoor that a whole bunch of options vest next month, probably on the date they went public (Oct. 28). There’s an expectation that a lot of people will be heading for the exits then.
Quite likely which will just result in things getting worst.
I doubt he had any knowledge. and he was not the responsible person for the FAA…the SEC might be different
The FAA is unlikely to put folks in jail, fines and loss of licenses are the most likely outcome IF they find their were violations and want to push it.
Whereas jail time is a possibility IF the SEC decides insider trading was involved in the stock sales, not to mention very large investor lawsuits. His only defense would be if he did not have any knowledge about it…
I expect that the VG lawyers will tell them to not respond to Doug for the latter reason as it is time for them to dummy up.
I agree but the FAA will have an enormous impact on their flying
Yes, and the FAA is going to be watching them closely when they lift the grounding. It’s time for them to get serious about safety.
They also need to become serious about the access road which is under the drop zone. An accident like the one that occurred with SpaceShipTwo Enterprise could rain debris on it and the railroad track, the BNSF mainline from Albuquerque to El Paso, next to it.
Enterprise narrowly missed a couple of truck drivers on a road below. When they resumed flights, they shifted the drop zone to over the mountains and not the valley.
Sadly that lesson seems to be lost on both Virgin Galactic and the FAA.
Moving the drop zone to the East along the border with White Sands Missile Range would eliminate the risk while allowing a bigger “box” for the glide to the runway.
I was surprised that in the final approach to the runway the flight with Sir Richard aboard paralleled the road (to the great cheers from the hundreds parked there to see it) before doing a 180 degree turn to land from the south while on the earlier May flight they just came into the runway from the north. I don’t recall if the wind directions were different, but on both days the winds we’re nearly nonexistent at ground level which makes me now wonder if the latter landing approach was as a result of it going outside the box and needing to correct for it.
I don’t expect very many answers from VG for the reason you mention. The investigation, grounding and negative publicity are a giant headache; SEC investigation and lawsuits would turn that into a years-long migraine.
Branson made it a point at the press conference to say how he loved to delve into the details of new ventures. He had a notebook with 40 ideas about how to improve the customer experience based on the training and the flight. It was certainly designed to show customers that he was engaged and making sure they’d get the best experience possible.
Did he just give those to VG and go off to his island without getting any sort of briefing about how the flight went technically? Did he not inquire about the schedule for the next flight or why it might be delayed in the month that followed? Did someone tell him everything’s fine, don’t worry about it? Did he purposely not want to know so he’d be free to sell stock?
I really think Doug Messier holds malice and a grudge towards Richard Branson
Four people have died so far.
thats a judgment you can make, I dont agree. but there are real problems with what happened on this flight, and you can ask people around here. I am a VG supporter
I’m concerned about the people who have put their trust in Virgin Galactic as customers and investors. Those are the people I write for.
Messier is an investigative reporter. Branson and Virgin Galactic have a history of a poor safety culture, refusing to be transparent, and putting ego and profits over people’s lives.
In my humble opinion, this issue is not that serious. It has to be taken into account in the future, but not a high risk issue.
I think VG has other deeper issues to be fixed.
I agree that VG has deeper issues. But this was significant enough to get the vehicle grounded by the FAA, and to raise concerns with Bank of America.
The passengers who bought tickets on VG are still intact and are not going to back out because Doug messier is continuously raising concerns about Red light warnings.
Look investors and passengers are still with VG. Don’t shed crocodile tears for public saftey.
The FAA is concerned about the vehicle flying outside its assigned airspace. This is no small matter. Temporary flight restrictions and NOTAMs are there for a reason. If you’re not familiar with these, please do some research. If you are, then you should understand why the agency takes them very seriously.
The analysts at Bank of America are concerned about VG’s public disclosures (or lack of them). Their point is this is information that shareholders should have known and not read about in a magazine article. If it has been paying attention, the SEC should be looking into this matter.
VG had more than 700 people signed up before SpaceShipTwo Enterprise crashed. That shrunk to approximately 600 before they reopened sales. So, yes, people have become frustrated with the long wait and the company’s problems.