According to David Peter Alan, “Whatever else the future may bring, for the next 20 years, and possibly the next 40, the bold and colorful Brightline brand and logo will disappear. In all likelihood, it will never come back.
A brand is a valuable asset, and companies fight hard to protect their brands. Here, Brightline sold, or perhaps even abandoned, that valuable asset. The company’s fortunes will now rise and fall based on Virgin’s decisions, more than on decisions made by incumbent managers, even if they keep their jobs.”
[David Peter Alan practices intellectual property and business law. He is also an advocate for train and rail transit riders at the New Jersey and national levels, and he enjoyed his rides on Brightline.]
Virgin Trains USA Inc. filed for an Initial Public Offering for $ 100,000,000 on the Nasdaq on November 16, 2018.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
THE SECURITIES ACT OF 1933
Virgin Trains USA LLC*
(Exact Name of Registrant as Specified in Its Charter)
CALCULATION OF REGISTRATION FEE
|Title of Each Class of Securities
To Be Registered
Aggregate Offering Price(1)
|Common stock, $0.01 par value per share||$100,000,000||$12,120|
The new U.S. venture is positioned as an “emerging growth company” (S-1 statement at 13 and 44), so the disclosure requirements are reduced. Nevertheless, Virgin Trains disclosed a lengthy litany of “Risks Associated with our Business” that a prospective investor could assume (at summary pages iv-v and pages 14-15 and 19-45) .
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below together with other information set forth in this prospectus before investing in our common stock.
[The regulatory filing shows that the rail service continues to lose money, posting a loss of $87 million for the first nine months of 2018. And passenger revenue of $4.8 million through the first nine months of the year lags far behind the $23.9 million that Brightline had projected for the full year of 2018.]
Risks Associated With Our Business
- Our limited revenue and cash flows and our limited history constructing and operating a passenger railroad makes evaluating our business and future prospects difficult, and may increase the risk of your investment. There can be no guarantee that we will achieve profitability and generate positive operating cash flows in the future.
- Our limited operating history also may limit your ability as an investor to evaluate our prospects due to our lack of historical financial data, our unproven potential to generate profits and our limited experience as a new company in addressing issues that may affect our ability to manage the construction, operation or maintenance of a passenger rail service.
- You must consider the risks and difficulties we face as a passenger rail company with limited construction and operating history. If we do not successfully address these risks, our business, prospects, operating results and financial condition will be materially and adversely harmed.
- With our current limited revenue and cash flow history, and the significant uncertainty regarding our ability to achieve profitability and generate positive cash flows in the future;
- We have limited revenue and cash flows and limited history constructing and operating a passenger railroad;
- Under the Virgin License Agreement, we are required to complete our rebranding from “Brightline” to the Virgin Trains USA brand by December 2019.
- We do not own the Virgin brand or any other Virgin-related assets, as we licensed the right to use the Virgin brand pursuant to the trademark license agreement we entered into with VEL on November 15, 2018 (the “Virgin License Agreement”). There are certain circumstances under which the Virgin License Agreement may be terminated in its entirety.
- We will be required to devote significant resources to our intended rebranding of our business from “Brightline” to “Virgin Trains USA.”
- Our ability to complete construction of the North Segment of our Florida passenger rail system will be contingent on our ability to obtain certain land rights from Cocoa to Orlando which will require us to satisfy the conditions precedent to effect a definitive agreement with the Greater Orlando Airport Authority in connection with our Florida passenger rail system;
- We have experienced cost overruns in connection with the construction of the South Segment and may also experience cost overruns in connection with the construction of the North Segment. For example, unforeseen or unexpected delays may increase the overall budget for our Florida passenger rail system and, under certain circumstances, we may be responsible for the increased costs. Furthermore, budgeted contingencies may not be sufficient to cover the full amount of such expenses.
- Shared use of our rail corridor with freight operations could have an adverse effect on our ability to utilize our railway efficiently, which could impact our operations and financial condition.
- We may be subject to litigation, which could have a material adverse effect on our ability to complete our Florida passenger rail system in a timely manner or our business, financial condition, operating results, cash flows, liquidity and prospects.
- We may incur liability under and costs to comply with environmental laws relating to the development and operation of our Florida passenger rail system.
- We have limited revenue and may not be able to generate sufficient cash to service all of our existing and future indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
- We have a substantial amount of indebtedness, which could adversely affect our business, financial condition and operating results. In addition, we may incur additional debt in the future…Our total indebtedness is approximately $625 million and is expected to increase substantially in connection with the construction of the North Segment…
- An active trading market for our common stock may never develop or be sustained.
- The market price and trading volume of our common stock may be volatile, which could result in rapid and substantial losses for our stockholders.
- We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.
- We may be unable to achieve our anticipated ridership, revenue or margin in our first stabilized year. Our estimates are subject to change and may differ materially from those presented above.
Richard Branson said in a statement: “We have had a lot of fun and success creating innovative transport businesses that shake up markets and establish loyal followings.
Brightline is at the forefront of innovation in this market, and the ideal partner for Virgin to work with to alter perceptions and traveling habits across the United States.”
How much does it cost to create “innovative transport businesses,” “shake up markets” and “alter perceptions and traveling habits?”
Could Virgin Trains USA be an experiment?
On another note, as reported by David Alan, “Virgin Trains reports that Brightline has been paying hefty sums to its parent company, Florida East Coast Industries. The rail service is on the hook for rent payments that include $98,000 a month for the parking garage in downtown West Palm Beach, $23,000 a month for the station in West Palm Beach and $15,000 a month for [right-of-way] in West Palm Beach. That’s $1.6 million a year in rent just for the Palm Beach County facilities.”
We will be reporting on this for you upon further review of the Form S-1.