Virgin Orbit’s would-be white knight and a $200 million bailout that fell flat

April 8 (Reuters) – As the fortunes of Richard Branson’s Virgin Orbit crashed to earth last month, a little-known investor named Matthew Brown emerged to offer a $200 million bailout.

Within two days of being contacted by Brown, Virgin Orbit CEO Dan Hart had secured board support for a tentative deal with the 33-year-old Texas-based investor, according to related documents and email exchanges reviewed by Reuters and three people with knowledge of the matter. of the discussions.

“We’ve had our board meeting this morning with an agreement to move forward, so I now have the buy-in I need,” Hart told Brown in a March 21 email seen by Reuters.

In a separate email to employees that day, Hart issued a hopeful note to Virgin Orbit’s 750 workers, most of whom had been furloughed to save money when the company halted operations earlier in March. In the email, Hart said the Long Beach, Calif.-based company would begin an “incremental resumption” of operations.

There would be no full resumption of operations.

The potential deal with Brown unraveled in less than a week with Virgin Orbit cutting off contact and threatening to take legal action against him if he disclosed confidential details of the potential investment, according to the cease-and-desist letter reviewed by Reuters, and the three people, who refused to be named due to the sensitivity of the matter.

The previously unreported details of a deal that was never done provide a window into Virgin Orbit’s unsuccessful battle to avoid bankruptcy. The company, which had been worth $3.8 billion by the end of 2022 and counted the US military among its biggest customers, filed for Chapter 11 this week.

Hart, a former Boeing veteran, did not respond to a request for comment on the conversations with Brown. Virgin Group, which owns 75% of Virgin Orbit, also declined to comment for this article. The group is providing funding to Virgin Orbit as the satellite launch company seeks a buyer in bankruptcy.

The legal notice was in response to an interview Brown gave on CNBC on March 23 when he said he was in “final discussions” to close a $200 million investment in Virgin Orbit within 24 hours. The letter from a lawyer for the company said Brown had overstated the content of the conversations and violated a non-disclosure agreement.

Virgin Orbit’s cratering stock price jumped more than 60% the day after Brown’s CNBC appearance.

The television interview followed a report by Reuters that said Brown was nearing a deal for a proposed investment in the company, citing the term sheet signed by Hart and Brown and the planned closing date of March 24.

When the company cut ties with Brown on March 25, it had uncovered problems with Brown’s credibility, the three people said. One said managers found evidence that conflicting details Brown had given about his background.

In interviews with Reuters last week, Brown dismissed accusations that he had misrepresented himself. He said Virgin Orbit had not provided information he had wanted until he was comfortable transferring $200 million into an escrow account as agreed in the term sheet. Brown did not specify the information he had sought, and Reuters was unable to independently verify his claim.

“I absolutely had the money 100%,” Brown added.

‘LAYS THE LAW UNDER THE RADAR’

Reuters apparently found discrepancies in several key elements of claims made by Brown on CNBC or on LinkedIn about the companies where he says he worked, the investments and affiliates.

Brown told Reuters he had no shares in Virgin Orbit and had not profited from publicizing his bid and the short-lived share price jump that followed. The company’s bankruptcy filing on Tuesday showed that a “Matthew Brown” held 238 shares at the time of the filing. Those shares were worth $48 on Thursday.

Brown said the listed investor was another Matthew Brown.

Reuters could not find corporate records for two companies where Brown said on LinkedIn that he had been an adviser or partner: Hong Kong-based Hogshead Spouter and Hawaii-based Kona Private Capital.

Brown told Reuters he worked through offshore entities, without giving details. He said he did not know where Kona and Hogshead were registered.

In his CNBC interview, Brown said he had worked with OpenAI. An OpenAI spokesperson said it had never worked with him.

Asked about this, Brown told Reuters he structured deals to protect investor confidentiality with a preference to “lay low under the radar”.

At the time of his Virgin Orbit approach, Brown’s LinkedIn page included an endorsement from Dan McDermott, identified as a former colleague at Hogshead Spouter and as a former Hong Kong Monetary Authority official. The central bank said it had no record of hiring McDermott.

Contacted by LinkedIn, McDermott declined to answer questions about his background.

Brown said he had worked for the Woods Family Office, a Houston-based private wealth firm, from 2008 to 2021, starting at age 18 in the role of CEO and managing $6 billion then as a senior adviser. The family office, whose website identifies Eric Woods as the principal, did not respond to a request for comment.

When asked about his company via LinkedIn, Eric Woods said, “I have nothing to say and neither does my family office.” He added: “While Matt is an adviser, we are not associated with Matt’s purchase of Virgin, which I assume this is about.”

After a Reuters inquiry to LinkedIn about whether Woods’ and McDermott’s accounts were genuine, both accounts were removed. LinkedIn declined to discuss the specific cases, but said its policy was to remove accounts found to be fraudulent.

Brown said he could not speak for the two men or say why their LinkedIn accounts were suspended. He added that Woods was “a great man and a very successful man” and “from what I remember of Dan, an incredible human being.”

‘CHANGE CURRENCY’

Brown told Reuters he was a producer on a 2009 documentary, “Loose Change,” which suggested the 9/11 attacks were a US government conspiracy.

Korey Rowe and Dylan Avery, partners in the project, said they gave Brown a production credit when the film was released. Brown had given Avery a camera, Avery told Reuters. Both Rowe and Avery said Brown failed to pay thousands of dollars in recording studio costs that he had verbally promised, and they cut his credit on later versions of the film.

Brown said he provided a “reasonable” amount of funding and that his split with the two “came down to a difference in personalities.”

Virgin Orbit filed for bankruptcy on Tuesday. It never recovered from a failed mission in January that sent a payload of satellites into the ocean.

It was a jarring comedown for a company that British billionaire Branson spun off from his space tourism firm Virgin Galactic in 2017 with hopes of challenging Elon Musk’s SpaceX.

Virgin Group had provided secured loans to the company, but no new equity as the unit’s cash dwindled.

Reporting by Joey Roulette in Washington and Kevin Krolicki in Singapore; Additional reporting by Ben Klayman in Detroit; Editing by Pravin Char

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