By Joey Roulette and Kevin Krolicki
April 8 (Reuters) - As the fortunes of Richard Branson's
Virgin Orbit were crashing to Earth last month, a little-known
investor called Matthew Brown appeared offering a $200 million
rescue.
Within two days of being contacted by Brown, Virgin Orbit
Chief Executive Dan Hart had secured board backing for a
preliminary agreement 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 discussions.
"We have had our board meeting this morning with 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 staff that day, Hart offered a
hopeful note for Virgin Orbit's 750 workers, most of who had
been furloughed to save cash when the company halted its
business earlier in March. In the email, Hart said the Long
Beach, California-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 severing contact and threatening to take legal
action against him if he revealed confidential details about the
potential investment, according to the cease-and-desist letter
reviewed by Reuters, and the three people, who declined 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 failed scramble to
avoid bankruptcy. The company, which had been worth $3.8 billion
in late 2022 and counted the U.S. military among its biggest
clients, filed for Chapter 11 this week.
Hart, a former Boeing veteran, did not respond to a request
for comment on the talks 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 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 nature of talks and breached a non-disclosure
agreement.
Virgin Orbit's cratering stock price bounced more than 60%
on the day after Brown's CNBC appearance.
The TV interview followed a report from 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 contact with Brown, on March 25, it had
uncovered issues with Brown's credibility, the three people
said. One said executives found evidence that contradicted
details Brown had provided about his background.
In interviews with Reuters over the past week, Brown
dismissed accusations he had misrepresented himself. He said
Virgin Orbit had not provided information he had wanted before
he was comfortable transferring the $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 assertion.
"I absolutely, 100%, had the money," Brown added.
'LAYING LOW BELOW THE RADAR'
Reuters found apparent discrepancies in several key elements
of assertions made by Brown on CNBC or on LinkedIn about the
companies where he says he had worked, his investments and
associates.
Brown told Reuters he had no shares in Virgin Orbit and had
not profited from taking his bid public and the short-lived
stock price jump that followed. The company's bankruptcy filing
on Tuesday showed a "Matthew Brown" as holding 238 shares at the
time of the filing. Those shares were worth $48 on Thursday.
Brown said the listed investor was a different Matthew
Brown.
Reuters could not find corporate registrations for two
companies where Brown said on LinkedIn 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 providing 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 for "laying
low below 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 official
with the Hong Kong Monetary Authority. The central bank said it
had no record of having employed McDermott.
Contacted by LinkedIn, McDermott declined to answer
questions about his background.
Brown said he had worked for Woods Family Office, a
Houston-based private wealth firm, from 2008 to 2021, beginning
at the age of 18 in the role of CEO managing $6 billion then as
a senior adviser. The family office, whose website identifies
Eric Woods as the principal, did not reply to a request for
comment.
When queried about his firm via LinkedIn, Eric Woods said:
"I have nothing to say and my family office doesn't either." He
added: "While Matt is an adviser, we're not affiliated with
Matt's purchase of Virgin, which I assume this is about."
Following a Reuters inquiry to LinkedIn about whether Woods'
and McDermott's accounts were genuine, both accounts were taken
down. LinkedIn declined to discuss the specific cases but said
its policy was to remove accounts it found to be fraudulent.
Brown said he couldn't speak for the two men or address why
their LinkedIn accounts had been suspended. He added Woods was
"a great man and a very successful man" and "from what I
remember of Dan, incredible human being."
'LOOSE CHANGE'
Brown told Reuters he was a producer on a 2009 documentary,
"Loose Change", which suggested the 9/11 attacks were a
conspiracy by the U.S. government.
Korey Rowe and Dylan Avery, partners in the project, said
they gave Brown a producing 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 January mission that sent a payload of
satellites into the ocean.
It was a juddering comedown for a company which British
billionaire Branson split 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)
((kevin.krolicki@thomsonreuters.com; +813 6441 1800; Reuters
Messaging: kevin.krolicki.thomsonreuters.com@reuters.net))
Keywords: SPACE VIRGIN ORBIT/FUNDING (INSIGHT, PIX)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
