Billionaire Richard Branson puts himself on trial

Has Sir Richard Branson’s business empire lost its sparkle? A UK court will address that question next month when hearing a $250 million claim brought by Virgin Enterprises against a Florida rail company. Some of the evidence may not be to the bearded billionaire’s liking.

At issue is whether Brightline Holdings LLC, backed by Fortress Investment Group, was within its rights in 2020 to terminate a 20-year deal to use the Virgin name and logo for its high-speed railway — then called Virgin Trains USA — due to an alleged deterioration of the Virgin brand.

There’s a lot at stake: Any suggestion that Virgin has lost cachet could imperil future licensing opportunities — a big source of income for the septuagenarian Branson. His publicity stunts and optimistic, nonconformist persona are an essential part of the group’s image.

Alas, an impartial outsider like me might reasonably conclude the Virgin brand has taken a beating; Branson’s net worth has certainly taken a hit, falling more than one-third since mid-2021 to $4.8 billion according to the Bloomberg Billionaires Index.

Branson rarely ducks a fight, though, and he didn’t get this wealthy by forgoing large royalties. In February, Virgin won a separate licensing dispute with Alaska Airlines Inc, after a UK court ruled it was entitled to $160 million in royalty payments despite Alaska dropping the Virgin name.

In this instance, Virgin has accused Brightline of an “opportunistic”
attempt to extricate itself from the contract — the loss-making train operator halted services for more than a year during the pandemic and carries a lot of debt. It is “completely false” to allege that Virgin had ceased to be a brand of international high repute, the group said when bringing the claim in 2021.

Virgin is seeking “to uphold our contractual rights and protect our brand” which “has been a symbol of innovation and entrepreneurship for more than 50 years,” a spokesperson said this week.

Maybe it was for most of those five decades, but at the time Brightline backed out of its contract in 2020 Virgin was looking a bit ropey. Branson’s run of ill fortune began shortly before the pandemic when Virgin lost two UK rail franchises in quick succession: One was nationalised due to financial difficulties, and Virgin was disqualified from re-bidding on the other due to a pension dispute.

Much worse was to follow in 2020 when COVID forced Branson’s airlines, hotels, cruise ships and gyms to all but shut down. Virgin Australia Holdings Ltd collapsed into administration, and Virgin Atlantic kept itself afloat in part by not immediately processing refunds, much to the airline customers’ chagrin. (Virgin Atlantic’s boss admitted in 2020 the carrier had “not lived up to the high standards we set ourselves”.)

“There was a time where it really looked like we were going to lose everything,” Branson told the BBC last month, calling a media backlash over his request for a £500 million ($620 million) government-backed loan to save Virgin Atlantic “painful.”

Decades of eye-catching exploits and nurturing an image as a environmentalist and philanthropist failed to win Branson a sympathetic hearing in the press. Shouldn’t a billionaire tax exile with their own private idyll in the British Virgin Islands dip more into their own pocket first? (In fairness, Branson did offer to mortgage his Caribbean home...)

Denied state aid, he began unloading more than $1 billion of shares in his space tourism company Virgin Galactic Holdings Inc. US retail investors, who were euphoric when Branson himself journeyed to suborbital space in 2021, were angered by these sales which hurt sentiment towards the stock. Branson retains an 11 percent stake.

The Virgin Galactic share price has since collapsed amid high cash burn, delays and operational mishaps which the company wasn’t always fully candid about. These events are the subjects of a separate lawsuit that Virgin Galactic and Branson are contesting.

In April, Branson’s satellite launch company Virgin Orbit Holdings Inc filed for bankruptcy following a launch mishap in the UK and after failing to raise more funding. A pair of Branson SPAC investments have also crashed to earth: online retailer Grove Collaborative Holdings has tumbled more than 95 percent while genetic testing company 23andMe Holding Co. has declined 80 percent.

Of course, Virgin can point to many recent positive developments, above all the big boost that post-pandemic revenge spending has given to the group’s leisure businesses. The UK and Australia airlines have been recapitalised, with Virgin Atlantic promising it will finally return to profit next year after more than half a decade of losses.

Virgin Hotels recently opened new outlets in New York and Edinburgh, while the “adults-only” Virgin Voyages — “Children are one of life’s great joys, but we believe absence makes the heart grow fonder” — launched a third cruise ship last month named Resilient. The luxury cruise business last year secured $550 million in funding, including from new investor BlackRock Inc. and existing co-owner Bain Capital, so clearly some people still see plenty of value in the Virgin brand.

Many of Branson’s darkest moments played out in the UK press and can’t have attracted much attention in Florida; and some of the events I describe here happened long after Brightline severed ties with Virgin. But by the same measure, Virgin’s post-pandemic rebound probably isn’t as relevant to this court case as the peril his empire faced in 2020.

Whatever the outcome, the High Court hearings are bound to test Branson’s philosophy that there’s no such thing as bad publicity.

Chris Bryant is a Bloomberg Opinion columnist covering industrial companies in Europe. Views are personal and do not represent the stand of this publication.

Credit: Bloomberg