Richard Branson's Virgin Galactic just announced that it would sell up to 25 million of its shares to support the company's struggling travel businesses, such as Virgin Atlantic. Selling those shares will strip Branson of control of the company, reducing his stake from about 59 percent to about 45 percent of its shares. The move comes just three weeks after Branson borrowed against his Caribbean island. In other words, he put his employees' welfare before his own twice in less than a month. He's set an example that every company owner and CEO should admire.
Virgin Galactic made its stock sale announcement less than a week after Virgin Atlantic had announced that it would lay off 3,150 employees over the next few months. Those layoffs may be even more frustrating for employees than they usually are, because nearly the entire company willingly sacrificed some pay to avoid them. Back on March 18, 96 percent of Virgin Atlantic employees agreed to take eight weeks off without pay and many others voluntarily left their jobs so that the company could avoid layoffs "for now." As it turns out, they managed to delay layoffs for only seven weeks.
The company doesn't have many options. U.S.-based carriers such as United have also seen demand fall off a cliff, but they are getting billions of dollars in government grants and loans to help them weather the pandemic and the resulting hard times. That's not a possibility for U.K.-based Virgin Group because the British government is requiring airlines to show that they've exhausted all other sources of funding before even asking for a loan, never mind a grant. Thus far, Virgin Atlantic's requests for a $500 million loan have been rejected on the grounds that this condition hasn't been met.
A $250 million bailout wasn't enough.
Given the ravages of the current marketplace, Virgin Atlantic has said from the beginning that it needs that external funding to survive. Thus far, in addition to Branson's borrowing an unspecified amount against his island, and employees taking unpaid leave, Virgin Group has also given Virgin Atlantic and its travel companies a $250 million bailout. But all of that still isn't enough.
Although the share price for Virgin Galactic (ticker name SPCE) dropped by 5 percent when it announced the coming sale, Branson should still manage to raise more than $490 million, which is almost equal to the loan he asked for, and may be enough to keep Virgin Atlantic from going under. Although Virgin Galactic has had its first test flight with a passenger along, it has yet to open up for paying customers. Still, the company's stock has done well. It's at $19.40 a share at this writing, compared with its 2017 IPO price of around $10, although down from its peak of around $34 in February.
It's worth pausing for a moment to compare Branson's actions with those of U.S. corporate leaders faced with the pandemic and the resulting economic chaos. Leaders of 267 American public companies decided they should pretend to be small businesses and grab some of the Paycheck Protection Program money even though actual small businesses are shutting down because those funds are all used up. Or there's Elon Musk, who reopened Tesla's California factory in defiance of a county order not to.
And then there was Branson, faced with the agonizing question of whether he should give up control of his beloved space exploration company or watch his flagship airline go down. The decision he made was the wrong one for his own net worth, but the right one for his airline and its employees. How many other business owners or leaders would make that same choice?