Virgin Galactic Holdings, Inc.
|Company Name||Virgin Galactic Holdings, Inc.|
|Class Period||October 26, 2019 to April 30, 2021|
|Lead Plaintiff Motion Deadline||July 27, 2021|
On October 25, 2019, post-market, Virgin Galactic was formed by a business combination between Social Capital Hedosophia Holdings Corp. ("SCH"), a special purpose acquisition company ("SPAC"), and the Company's then-private predecessor, after which SCH changed its name to "Virgin Galactic Holdings, Inc." and its ticker symbol to "SPCE" (the "Business Combination").
On April 12, 2021, the U.S. Securities and Exchange Commission (“SEC”) issued guidance advising that SPAC warrants, which are instruments that allow investors to buy additional shares at a fixed price, may need to be classified as liabilities rather than equity for many SPAC transactions, which had previously been accounted for as equity in these deals.
On April 30, 2021, post-market, Virgin Galactic announced in a press release "that it has rescheduled the reporting of its financial results for the first quarter 2021 to following the close of the U.S. markets on Monday, May 10, 2021. Virgin Galactic will now host a conference call to discuss the results and provide a business update that day at 2:00 p.m., Pacific Time (5:00 p.m., Eastern Time). The Company is rescheduling its reporting due to the recent statement issued by the [SEC] on April 12, 2021 relating to the accounting treatment of warrants issued by special purpose acquisition companies (the 'SEC Statement')." The company further advised that "following its review of the SEC Statement and consulting with its advisors, the Company will restate its consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The restatement is due solely to the accounting treatment for the warrants of Social Capital Hedosophia Holdings Corp. that were outstanding at the time of the Company's business combination on October 25, 2019. The Company expects to file the restated financials prior to the new conference call date and estimates that it will recognize incremental non-operating, non-cash expense for each of the fiscal years ended December 31, 2020 and December 31, 2019."
On this news, Virgin Galactic's stock price fell $2.01 per share, or 9.07%, to close at $20.14 per share on May 3, 2021.
The complaint filed alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors that: (1)for accounting purposes, SCH's warrants were required to be treated as liabilities rather than equities; (2) Virgin Galactic had deficient disclosure controls and procedures and internal control over financial reporting; (3) as a result, the Company improperly accounted for SCH warrants that were outstanding at the time of the Business Combination; and (4) as a result, Defendants' statements about its business, operations, and prospects, were materially false and misleading and/or lacked a reasonable basis at all relevant times.
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