Virgin Galactic Sued by Investor Over SPAC’s Accounting Issues

(Bloomberg) — Virgin Galactic Holdings Inc. was sued by an investor who claims he misplaced cash when the space-tourism firm introduced that it might restate its outcomes on account of regulatory steering concerning the accounting remedy of warrants.

The Las Cruces, New Mexico-based firm mentioned on April 30 that it must restate its 2020 outcomes due to accounting steering of regulators associated to particular function acquisition firms, or SPACs. The subsequent buying and selling day, its shares fell 9%. The firm mixed with Social Capital Hedosophia, run by former Facebook govt Chamath Palihapitiya, and went public in October 2019.

The Securities and Exchange Commission set forth new steering in April that warrants, that are issued to early traders within the offers, won’t be thought-about fairness devices and will as a substitute be liabilities for accounting functions. In a SPAC, early traders purchase items, which generally features a share of frequent inventory and a fraction of a warrant to buy extra inventory at a later date. They’re thought-about a sweetener for backers and lots of firms handled them as fairness devices for accounting functions.

The investor, Shane Lavin, mentioned within the lawsuit filed Friday in federal courtroom in Brooklyn, New York, that Virgin Galactic and its executives knew that the outcomes they had been reporting had been flawed. They are in search of class-action standing for his or her lawsuit. Many different SPACs have made or are contemplating related restatements as a result of accounting remedy of warrants.

Virgin Galactic’s inventory has been risky. Since May 3, the day of the worth drop that Lavin is suing over, its shares have climbed 55%.

Representatives of Virgin Galactic didn’t instantly reply to a request for remark.

The case is Lavin v. Virgin Galactic Holdings Inc., 21-cv-03070, U.S. District Court, Eastern District of New York (Brooklyn).

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