Virgin Orbit’s potential white knight and $200 million bailout that failed

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

Within two days of Brown’s call, Virgin Orbit CEO Dan Hart secured board support for a preliminary agreement with the 33-year-old Texas-based investor, according to related documents, email exchanges reviewed by Reuters and three people familiar with the matter. of discussions.

“We had our board meeting this morning with the agreement to move forward, so now I have the approval that I need,” Hart told Brown in an email March 21, which was seen by Reuters.

In a separate email to employees that day, Hart offered a note of hope for Virgin Orbit’s 750 employees, most of whom were furloughed to save cash when the company suspended operations earlier in March. In the email, Hart said the Long Beach, California-based company would begin a “phased resumption” of operations.

There will be no full resumption of operations.

The potential deal with Brown collapsed in less than a week as Virgin Orbit cut off contact with him and threatened legal action against him if he disclosed confidential details about the potential investment, according to a cease-and-desist letter reviewed by Reuters. People who declined to be named due to the sensitivity of the matter.

Previously unreported details of a deal that never went through provide a window into Virgin Orbit’s failed scramble to avoid bankruptcy. The company, which was worth $3.8 billion in late 2022 and counts the US military among its largest customers, filed for Chapter 11 this week.

Hart, a 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 financing to Virgin Orbit as the satellite launch company seeks a buyer out of bankruptcy.

The legal notice came 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 the company’s lawyer said Brown exaggerated the nature of the conversations and breached a non-disclosure agreement.

Virgin Orbit’s crater stock prices rebounded more than 60% the day after Brown appeared on CNBC.

The television interview followed a report from Reuters that said Brown was close to closing a deal for a proposed investment in the company, citing the memorandum of terms Hart and Brown signed and the scheduled March 24 deadline.

When the company cut off contact with Brown, on March 25, the three people said, it revealed issues with Brown’s credibility. One said that executives had found evidence that contradicted the details Brown had provided about his background.

In interviews with Reuters over the past week, Brown has denied accusations that he has misrepresented himself. He said Virgin Orbit did not provide the information he would have wanted before he was comfortable transferring the $200 million into an escrow account as agreed in the terms sheet. Brown did not specify what information he was seeking, and Reuters has not been able to independently verify his assertion.

“I absolutely have the money 100 percent,” Brown added.

Low placed under the radar

Reuters found apparent inconsistencies in several key elements of assertions Brown made on CNBC or on LinkedIn about the companies he works for, his investments and his partners.

Brown told Reuters he did not own any shares in Virgin Orbit and had not benefited from his offering and the short-term jump in share prices that followed. The company’s bankruptcy filing Tuesday showed Matthew Brown owned 238 shares at the time of the filing. Those shares were worth $48 on Thursday.

The listed investor is a different Matthew Brown, said Brown.

Reuters was unable to find the corporate registrations of two companies Brown said on LinkedIn he was an advisor or partner to: Hong Kong-based Hogshead Spouter and Hawaii-based Kona Private Capital.

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

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

Asked about this, Brown told Reuters that he structured the deals to protect investor confidentiality with a preference for “keeping a low profile”.

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

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

Brown said he worked at Woods Family Office, a Houston-based private wealth firm, from 2008 to 2021, starting at age 18 as CEO managing $6 billion and then as a senior advisor. The family office, which identifies Eric Woods as the director on its website, 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’s office.” He added, “While Matt is an advisor, we are not affiliated with Matt’s purchase of Virgin, which I assume this relates to.”

Following an inquiry from Reuters to LinkedIn as to whether Woods and McDermott’s accounts were real, both accounts were deleted. LinkedIn declined to discuss specific cases but said it was its policy to remove accounts it 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 guy and a very successful guy” and “from what I remember about Dan, an amazing human being”.

‘change change’

Brown told Reuters he was the producer of a 2009 documentary, Loose Change, which suggested the September 11 attacks were a plot by the US government.

Corey Rowe and Dylan Avery, partners in the project, said they gave Brown production credit when the film was released. Avery told Reuters that Brown gave Avery a camera. Both Rowe and Avery said Brown failed to pay him verbally promised thousands of dollars in recording studio costs, and cut back on his credit from subsequent copies of the film.

Brown said he had provided a “reasonable” amount of funding and that his separation from the two was “due to a difference in personalities”.

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

British billionaire Branson split from his space tourism company Virgin Galactic in 2017 in hopes of challenging Elon Musk’s SpaceX.

The Virgin Group had made secured loans to the company but no new equity as the unit’s cash flow dwindled.

(Reporting by Joey Rowlett in Washington and Kevin Krolicki in Singapore; Additional reporting by Ben Kleiman in Detroit; Editing by Pravin Char

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