British billionaire Richard Branson’s Virgin Galactic will merge with a US investment firm to become the world’s first publicly-traded space tourism venture – with an eye on sending its first clients into space within a year, the group’s CEO said on Tuesday.
“By embarking on this new chapter, at this advanced point in Virgin Galactic’s development, we can open space to more investors and in doing so, open space to thousands of new astronauts,” Branson said in a statement.
Virgin Galactic and Wall Street investment firm Social Capital Hedosophia (SCH) will merge, with SCH expected to own up to 49 per cent of the combined company, the statement said.
The total value of the merger is $1.5 billion, the parties said. The transaction is expected to be complete in the second half of this year.
Until now, Virgin Galactic has largely been funded by Branson himself, who launched the company in 2004 and has thus far invested more than $1 billion of his personal fortune.
After years of development, and a fatal accident in 2014 that killed a co-pilot, the company has a viable spacecraft that has twice reached the edge of space.
But so far, no paying customers have taken the journey.
“We plan to do that within a year,” said CEO George Whitesides.
Until then, test flights will continue. The company is also moving into its spaceport in New Mexico, the base for its commercial flights.
To date, Virgin has reservations from more than 600 people across 60 countries, earning it about $80 million in paid deposits and $120 million in potential revenues, the group said on Tuesday.
Whitesides said there are 2,500 people on the waiting list.
Commercial space race
Virgin Galactic is up against Amazon founder Jeff Bezos’ Blue Origin and, in a different category, Elon Musk’s SpaceX to be the first to send tourists into space.
SCH founder and CEO Chamath Palihapitiya – who is investing $100 million of his own money in the merger and is set to be the new partnership’s chairman – expressed confidence.
Virgin Galactic “is light years ahead of the competition”, Palihapitiya said.
“I cannot wait to take my first trip to space and become an astronaut,” he added.
The cash injection will be welcome – a similar proposal from Saudi Arabia’s public investment fund was suspended last year following the murder of journalist Jamal Khashoggi.
The long wait
Virgin is offering customers just a few minutes in space, six at a time. They will float in the spacecraft’s cabin and see the curvature of the Earth under a black sky through huge windows.
The spaceship is a cross between a plane and a rocket. It is released at high altitude by a carrier airplane and then ignites its own engine, travelling at three times the speed of sound.
The boundary between the Earth’s atmosphere and outer space is set at 80km by the US military and the space agency Nasa, though the international standard is 100km.
But Whitesides says that this difference is negligible “from an experience perspective”.
Then the ship falls to Earth like a cannonball before gliding and landing like a plane back in the New Mexico desert.
“Great progress in our test flight programme means that we are on track for our beautiful spaceship to begin commercial service,” Branson said in Tuesday’s statement.
To keep clients enthused during the long wait, Whitesides said the company took some of them on a recent trip to Chile to see the total solar eclipse.
“Very few” have asked for refunds over the years, he said.
Those who have already paid up to $250,000 plus those on the waiting list would keep Virgin Galactic busy for “a good chunk of the first three or four years”, Whitesides added.
“When you look at the development costs and the costs to create this service, and the value that it provides, it’s probably a bit underpriced,” Whitesides said.
“I do expect the price to go up.”
As for Virgin’s competition, Whitesides says there will be enough business for them too, and that the industry will be “capacity-constrained” for several years to come.