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Virgin Galactic shares sank on Monday after the company filed to sell up to $500 million (£360 million) in common stocks. The British-American spaceflight company announced its sell-off plan after founder Sir Richard Branson’s successful test flight to the edge of space.
Successful Space Flight
On Sunday, Sir Richard Branson boarded the rocket plane known as ‘Unity’ and reached a height of 282,000 feet. Dave Mackay and Michael Masucci piloted the aircraft, and the other passengers included Virgin Galactic employees Sirisha Bandla, Beth Moses, and Colin Bennett. The voyage puts Branson ahead of Jeff Bezos and Elon Musk by making him the first of the space company founders to take off in one of his own spacecrafts.
The flight was viewed as a test for the space tourism experience. Virgin Galactic has another two additional test flights planned before it starts offering commercial services in 2022 – it has a backlog of approximately 600 confirmed customers in early 2022. Ticket sales will resume after the test flights, and fare prices are expected to be higher than the initial $250,000 estimate.
Sir Richard Branson was incredibly excited about the experience and noted that he had already begun brainstorming how to improve the experience for potential customers.
“I’ve had my notebook with me and I’ve written down 30 or 40 little things that will make the experience for the next person who goes to space with us that much better,” he said. “The only way sometimes you can find these little things is to get in a spaceship and go to space and experience it for yourself.”
“We view Branson’s achievement as a massive marketing coup for Virgin Galactic that will be impossible for the public to ignore,” said Ken Herbert, an equity analyst at Canaccord Genuity. The company has a ‘buy’ rating on Virgin Galactic but placed a $35 price target on the stock – that amount is below its current level.
Unexpected Stock Sell-Off
Virgin Galactic (SPCE) filed notice of its stock sale offering with the Securities and Exchange Commission, with the sell-off coming into effect on July 12th. Following the news yesterday, Virgin Galactic dropped 17.3% – the largest decline since December 14th. Trading in the firm was briefly halted yesterday morning due to volatility.
Virgin Galactic has 240 million shares outstanding, and 164.6 million are available for the public to trade – this is what’s known as a float. Using Friday’s closing price of $49.20, the firm’s $500 million offering equates to approximately 10.2 million shares.
The stock sale has caused speculation that the company is in need of additional funds as it prepares to offer space flights to the general public next year.
Virgin Galactic stated that it planned 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.”
However, that wasn’t enough to appease its current shareholders, who are thought to be unhappy at the prospect of their holdings being diluted by the proposed share sell-off. As a result, the share price dropped.
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