Sir Richard Branson risks losing control over Virgin Galactic board

Sir Richard Branson is Virgin Galactic's largest shareholder. Photo / AP

Sir Richard Branson risks losing his grip on Virgin Galactic as he continues to sell down his stake in the space tourism venture to fund his pandemic-hit businesses.

The British billionaire's US$300 million ($427.1m) share sale disclosed on Friday leaves his Virgin Group barely above a threshold at which company rules let him appoint three of its directors. The arrangement, alongside the two seats controlled by Virgin Galactic chairman Chamath Palihapitiya, gives the pair majority control over the nine-strong board.

Sir Richard, Virgin Galactic's biggest shareholder, is able to appoint the three board members as long as Virgin and former investment partner Aabar Space retain more than 50 per cent of their original stake in the company.

However, last week, Virgin Galactic revealed that Sir Richard had sold off 10.5m shares, around a fifth of his stake, leaving him with 50.6 per cent of the original holding. He is not able to take his stake below 50 per cent until October, the two-year anniversary of Galactic's listing.

Sir Richard has gradually reduced his stake in Virgin Galactic during the pandemic, despite its rising share price and the company successfully transporting the 71-year-old to the edge of space last month.

Virgin has used the share sales, which total US$950m, will be used to support sister companies such as Virgin Atlantic and cruise line Virgin Voyages, which have been hit hard by the pandemic.

If Sir Richard's Galactic stake were to fall below 25 per cent he would lose a second board appointment as well as a veto over sales, acquisitions and dividends. Its existing three appointees are former Virgin Atlantic boss Craig Kreeger, Virgin investment chief Evan Lovell and former Goldman Sachs executive George Mattson.

Sir Richard fulfilled a decades-long ambition to travel to the edge of space last month, a step towards Virgin Galactic transporting members of the public. It recently resumed selling tickets for US$450,000, double the price at which it had previously sold reservations.

Shares in the US$6.5 billion company have swung wildly since it went public in 2019, as it has joined the ranks of so-called "meme stocks" pumped up by online traders.

A spokesperson said Sir Richard continued to be Virgin Galactic's largest shareholder.