Branson has total gains of at least 50% from the SPAC that acquired 23andMe, even though the company’s shares have plunged more than 70% since they began trading in June 2021. That’s partly because sponsors typically hold 20% of the blank-check firm’s shares after the initial public offering, allowing them to end up with a stake in the target company for comparatively little money. SPAC sponsors also face additional charges such as underwriting fees.
Virgin Group filed last year for a third SPAC but has yet to list it as the prospects of a recession and tighter regulations have lessened the appetite for blank-check firms. At least two companies that recently merged with SPACs — retailer Enjoy Technology Inc. and Electric Last Mile Solutions Inc., an EV-truck-startup — have filed for bankruptcy.
Richard Branson on the floor of the New York Stock Exchange following Virgin Galactic’s 2019 public listing. Photographer: Michael Nagle/Bloomberg
Virgin’s initial investments have helped shelter Branson’s fortune from the harshest fallout. Like many SPAC founders, Virgin firms paid just $25,000 for their original stakes in the two blank-check companies that acquired 23andMe and Grove.
“The team reviewed hundreds of businesses and saw the phenomenal potential of both 23andMe and Grove to grow and lead in their respective categories,” the Virgin spokesperson said.
They also spent more than $100 million buying additional shares or warrants in private placements connected to both companies, and at least another $55 million acquiring Virgin Orbit stock ahead of its public trading debut.
In return for getting in at a good price, Branson’s investment firms face a lock-up period of as long as seven years for their holdings in 23andMe and Grove.
“The incentives of the sponsors are to get a deal done — any deal — because they get the founder’s shares very cheaply,” said Rodrigues, who has studied SPACs.
Branson has previously said raising funds through a SPAC is more efficient and less time-consuming than a traditional public offering.
From initial listing registration to trading debut, Virgin’s first SPAC raised funds more than twice as fast as Virgin Money UK Plc, the British lender in which Branson is a major investor. Its second blank-check firm, however, took almost as long as the bank.
Despite the recent turmoil, Branson isn’t ruling out starting another blank-check firm.
“If we can find other companies like Grove, we’d certainly consider it,” he said last month in an interview on Bloomberg Television.
This article was provided by Bloomberg News.