Virgin Galactic Holdings, Inc. (SPCE) Made Misstatements Regarding Its Internal Control Over Financial Reporting
Virgin Galactic was formed on October 25, 2019, when the special purpose acquisition company (“SPAC”) Social Capital Hedosophia Holdings Corp. (“SCH”) combined with the private company Legacy Virgin Galactic.
On April 12, 2021, the 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. Warrants had previously been accounted for as equity in these deals. On April 30, 2021, Virgin Galactic issued a press release announcing that it had “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” due to the SEC’s statement “relating to the accounting treatment of warrants issued by special purpose acquisition companies.” The press release further stated that 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.” On this news, Virgin Galactic’s stock price fell $2.01 per share, or over 9.07%, to close at $20.14 per share on May 3, 2021.
During the class period, defendants made false and misleading statements and failed to disclose that: (i) for accounting purposes, SCH’s warrants were required to be treated as liabilities rather than equities; (ii) Virgin Galactic had deficient disclosure controls and procedures and internal control over financial reporting; and (iii) as a result, the Company improperly accounted for SCH warrants that were outstanding at the time Virgin Galactic went public.
Virgin Galactic Holdings, Inc. (SPCE) shareholders have options.
All representation is on a contingency fee basis. Shareholders pay no fees or expenses.
