The deal was earlier reported by the Wall Street Journal, which said the SPAC, Social Capital Hedosophia Holdings Corp, will invest about $800 million (£639 million) for a 49% stake in Virgin Galactic.
The deal could be announced as early as Tuesday morning, said the source, who declined to be named because the matter is confidential.
Virgin Galactic and Social Capital Hedosophia did not respond to requests for comment from Reuters outside regular business hours.
Branson's company is racing against Blue Origin, the space business of Amazon.com Inc founder Jeff Bezos, to bring tourists into space.
Virgin Galactic in February soared to the edge of space with a test passenger for the first time, nudging the company closer to its goal of suborbital flights for space tourists.
After Branson founded the company in 2004, his ambitious timeline for taking customers into space suffered delays and a fatal setback when the original SpaceShipTwo crashed on a test flight in 2014 that killed the co-pilot and seriously injured the pilot.
Branson has said he plans to be the first passenger on SpaceShipTwo's first commercial flight in mid-2019.
(Reporting by Eric Johnson in Seattle and Rama Venkat in Bengaluru; Editing by Subhranshu Sahu)