Business Essentials for Professionals


The $200 Million Rescue Attempt By Virgin Orbit And Would-Be White Knight That Failed

The $200 Million Rescue Attempt By Virgin Orbit And Would-Be White Knight That Failed
Last month, as Richard Branson's Virgin Orbit's fortunes were about to collapse, an unknown investor by the name of Matthew Brown emerged and offered a $200 million rescue.
According to related documents and email exchanges examined by Reuters and three people with knowledge of the discussions, Virgin Orbit Chief Executive Dan Hart secured board approval for a preliminary agreement with the 33-year-old Texas-based investor within two days of being contacted by Brown.
"We have had our board meeting this morning with agreement to move forward, so I now have the buy-in I need," Hart told Brown in a March 21 email seen by Reuters.
That same day, in a different email to the crew, Hart expressed optimism for Virgin Orbit's 750 employees, the most of whom had been furloughed to save money when the company ceased operations earlier in March. The Long Beach, California-based business would start a "incremental resumption" of activities, according to Hart's email.
There wouldn't be a complete restart of operations.
According to the cease-and-desist letter reviewed by Reuters and the three people, who asked to remain anonymous due to the sensitivity of the situation, the potential deal with Brown fell through in less than a week after Virgin Orbit severed contact with him and threatened legal action if he revealed trade secrets about the potential investment.
The previously revealed specifics of a deal that was never completed offer a glimpse into Virgin Orbit's vain attempt to stay out of financial trouble. The business, which had the U.S. military as one of its largest customers and had a late 2022 market value of $3.8 billion, filed into Chapter 11 bankruptcy this week.
An inquiry for comment regarding the conversations with Brown was not answered by Hart, a former Boeing employee. For this report, Virgin Group, which owns 75% of Virgin Orbit, likewise declined to provide a comment. The firm is helping Virgin Orbit with funding as the satellite launch business looks for a buyer after declaring bankruptcy.
In an interview with CNBC on March 23, Brown stated that he was in "final discussions" to close a $200 million investment in Virgin Orbit within 24 hours. This statement prompted the legal warning. According to the letter from a corporate counsel, Brown misrepresented the scope of the discussions and violated a non-disclosure agreement.
The day following Brown's interview on CNBC, Virgin Orbit's plummeting stock price increased by more than 60%.
The TV interview came after a story from Reuters that said Brown was close to agreeing to a proposal to invest in the business, citing the term sheet Hart and Brown had signed and the March 24 closing date as evidence.
According to the three persons, when the company broke off contact with Brown on March 25, it had discovered problems with Brown's credibility. According to one, executives discovered evidence that refuted the background information Brown had presented.
Throughout the past week, Brown has denied allegations that he misrepresented himself in interviews with Reuters. According to him, he needed further information from Virgin Orbit before he felt secure placing the $200 million into an escrow account as specified in the term sheet. Since Brown did not identify the details he was looking for, Reuters was unable to independently confirm his claim.
"I absolutely, 100%, had the money," Brown added.
Reuters discovered what appeared to be inconsistencies in a number of significant areas of claims made by Brown on CNBC or LinkedIn concerning the businesses he claimed to have worked for, his investments, and his associates.
Brown admitted to Reuters that he had no Virgin Orbit stock and had not benefited from the short-lived stock price increase that accompanied the announcement of his proposal. A "Matthew Brown" was identified as the shareholder who had 238 shares at the time of the company's bankruptcy filing on Tuesday. On Thursday, their shares were worth $48.
The listed investor, according to Brown, was a different Matthew Brown.
Reuters was unable to locate company registrations for two businesses that Brown claimed on LinkedIn to have advised or co-founded: Hogshead Spouter in Hong Kong and Kona Private Capital in Hawaii.
Brown told Reuters that he used offshore companies but didn't go into further detail. He claimed not to be aware of Kona and Hogshead's registration information.
Brown mentioned working with OpenAI in his interview with CNBC. A spokesman for OpenAI claimed that they had never collaborated with him.
When questioned about it, Brown told Reuters that he prefers to "lay low below the radar" and that he structures deals to safeguard investor anonymity.
Brown's LinkedIn page featured a recommendation from Dan McDermott, who was listed as a former coworker at Hogshead Spouter and a former official with the Hong Kong Monetary Authority at the time of his Virgin Orbit approach. The central bank claimed to have no history of hiring McDermott.
When contacted by LinkedIn, McDermott chose not to provide any background information.
From 2008 through 2021, according to Brown, he worked for the Houston-based Woods Family Office, a private wealth management company, first as the CEO handling $6 billion when he was 18 years old and later as a senior consultant. The family office did not respond to a request for comment, despite the fact that Eric Woods is listed as the principal on the website.
Eric Woods responded, "I have nothing to say and my family office doesn't either," when asked about his company via LinkedIn. While Matt is an adviser, we are not associated with Matt's Virgin purchase, which is what I presume this is about, he continued.
Both Woods and McDermott's accounts were deleted when Reuters contacted LinkedIn to ask if the profiles were legitimate. LinkedIn declined to comment on the particular instances but stated that it had a policy of removing accounts it deemed to be fraudulent.
Brown stated he was unable to speak for the two guys or discuss the reason for the suspension of their LinkedIn accounts. He continued, "From what I remember of Dan, Woods was an incredible human being. He was a great man and a very successful man."
According to Brown, the 2009 documentary "Loose Change" argued that the 9/11 attacks were the result of a U.S. government plot.
When the movie was released, the project's co-creators, Korey Rowe and Dylan Avery, claimed to have given Brown a producing credit. According to Avery, Brown had given her a camera. Rowe and Avery deleted Brown's credit from later iterations of the movie because they claimed he didn't pay thousands of dollars in recording studio expenses that he had verbally agreed to.
According to Brown, he contributed a "reasonable" amount of money, and their disagreement "came down to a difference in personalities."
On Tuesday, Virgin Orbit declared bankruptcy. It was never able to bounce back after a disastrous flight in January that dropped a payload of satellites into the ocean.
In an effort to compete with Elon Musk's SpaceX, British entrepreneur Branson in 2017 spun off a company from his space tourism enterprise Virgin Galactic.
As the unit's cash flow declined, Virgin Group had offered secured loans to the business but no additional equity.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc