Virgin Galactic stock hits lower trajectory
$500M planned share sale drives lower price after space trip
Virgin Galactic shares veered sharply lower Monday after the spaceflight company said it’s made arrangements to sell up to $500 million in stock.
The disclosure comes a day after founder Richard Branson briefly rocketed into space aboard Virgin’s winged space plane for the first time in what was the company’s highest-profile flight yet as it looks to begin taking up customers next year.
The stock dropped over 17% in Monday trading, shedding $8.56, to close at $40.69. Trading in the stock was briefly halted shortly after the market opened. Virgin is still up 76% so far this year.
The company didn’t reveal the timing of the proposed stock sale, but said it plans to use the proceeds to fund manufacturing, development of its spaceship fleet and infrastructure improvements, among other expenses, according to a filing with the Securities & Exchange Commission.
Virgin Galactic already has more than 600 reservations from would-be space tourists, with tickets initially costing $250,000 apiece. The company received clearance from the Federal Aviation Commission last month to begin taking paying customers into space from its facilities in New Mexico, something the company has said it is looking to start doing next year.
Branson had teased a major announcement about ferrying more people to space following his flight, which some expected would be an announcement about Virgin Galactic reopening ticket sales. Instead, upon his return to Earth Sunday, Branson announced a sweepstakes drawing for just two seats on a Virgin Galactic jaunt. That announcement was “likely less than what investors were hoping for,” analysts at Canaccord Genuity wrote in a research note Sunday.
The analysts, which have a “Buy” rating on the stock, say the reopening of ticket sales is going to be a key barometer for assessing the company’s future customer backlog beyond the roughly 600 people who have already signed up for space flights.
Branson edged out billionaire Jeff Bezos, founder of rival space tourism company Blue Origin, as the first person to blast off in his own spaceship. Bezos, his brother and two other people are set to go up on a Blue Origin rocket on July 20.
Blue Origin has yet to sell tickets to the public. It’s waiting for Bezos’ flight before announcing its ticket prices.
Virgin’s other rival, SpaceX, plans to take tourists on more than just brief, up-and-down trips just outside the Earth’s atmosphere. The company, which is already launching astronauts to the space station for NASA and building moon and Mars ships, plans to ferry customers into orbit around the Earth for days, with seats costing well into the millions. The company’s first private flight is set for September.