Virgin Galactic shares fall after $500m stock sale announcement
Shares in Virgin Galactic have fallen back to earth with a bump after an announcement by the spaceflight firm of its plans to sell up to $500m (£360m) of stock – only a day after the company’s founder, Richard Branson, completed a flight to the edge of space.
Virgin Galactic’s share price had risen by about 9% in pre-market trading on Monday but changed course and plummeted by as much 14% after the company said it intended to sell off shares to raise funds.
The company, founded by the billionaire entrepreneur Branson in 2004, revealed in a filing to the US Securities and Exchange Commission that it had entered into a distribution agency agreement with the Wall Street investment banks Credit Suisse, Morgan Stanley and Goldman Sachs.
Virgin Galactic said it intended to use the proceeds of the sale “for general corporate purposes, including working capital, general and administrative matters and capital expenditures for its manufacturing capabilities, development of its spaceship fleet and other infrastructure improvements”.
While investors had initially welcomed Virgin Galactic’s successful first fully crewed test flight, existing shareholders were not pleased with the prospect of their holdings being diluted by the proposed share issue, which led to the fall in the share price.
Virgin Galactic’s shares are currently worth more than $43, giving the company a market value of about $11.8bn, although they remain almost a third below their record high of almost $63 in February this year.
Branson’s trip from Virgin Galactic’s operational base at Spaceport America in the New Mexico desert to the edge of space and back was seen as a key milestone in the company’s goal of launching a commercial space service next year.
The flight allowed the British entrepreneur to seal his place as the first of the rival “billionaire space barons” to make the trip.
The commercial space race is hotting up, and Amazon’s billionaire founder, Jeff Bezos, is just over a week away from making his own flight in his New Shepard rocket, named after Alan Shepard, the first American astronaut in space, and manufactured by Bezos’s company Blue Origin.
Branson’s venture, created to develop commercial spacecraft and cater to future space tourists, has had several false starts after he first forecast that paying passengers would be flown into space by 2008.
Virgin Galactic is planning two additional test flights before the company aims to begin commercial services in 2022. Virgin Galactic’s chief executive, Michael Colglazier, told the Financial Times on Monday that the company hoped to carry out at least one flight a day from each of its spaceports in the future.