Virgin Galactic shares fell this week, despite the firm’s recent spaceflight success, after it announced plans to sell up to $500m (£360m) of its stock. The announcement came just a day after Richard Branson, the company’s founder, completed a flight to the edge of space.
The company has seen a 9% rise in its share price in Monday’s pre-market trading, yet plummeted as much as 14% following the announcement that it would sell off stocks to raise funds. It was Virgin Galactic stock’s worst day in more than a year. Trading of the stock was halted briefly on Monday due to volatility.
Virgin Galactic revealed in a filing to the US Securities and Exchange Commission that it had entered into a distribution agency agreement with three major Wall Street investment banks – Goldman Sachs, Morgan Stanley, and Credit Suisse.
It said that it intended to use the proceeds of the stock 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 Virgin Galactic shareholders had welcomed the firm’s successfully first fully crewed test flight, fears of their holdings being diluted by the proposed share issue led to the fall in share price.
The spaceflight company’s notoriously volatile shares are currently worth more than $43, with a total market value of around $11.8bn. However, that is close to a third below the record high of almost $63 from February this year.
Test flight still a significant achievement
Branson’s first successful test flight is seen as a major milestone in the company’s mission to provide a commercial space travel service in 2022.
The company’s spacecraft, VSS Unity, can hold up to six passengers alongside two pilots. The company has around 600 reservations already, each fetching between $200,00 and $250,000.
There are two additional test flights planned before Virgin Galactic will launch its space tourism service. Michael Golglazier, the company’s chief executive, told the Financial Times that Virgin Galactic hopes to carry out at least a flight a day from each of its spaceports in the future.
Canaccord Genuity analyst Ken Herbet said that the achievement is a “massive marketing coup” for Branson and Virgin Galactic, although added that “the challenge now will be for the company to maintain the momentum and establish a flight plan in 2022 that can demonstrate a repeatable and increasing commercial launch cadence.”
The investment firm currently rates Virgin Galactic as a buy, although it has placed a £35 on the stock – below its present level.