Investors surely dreamed of Galactic Virgo (NYSE:SPCE) stock going “to the moon” after Sir Richard Branson’s historic spaceflight last summer. They were deeply disappointed. Shares of SPCE have fallen 80% since Branson became the first of the billionaire space company’s founders to take his own ship into space.
The July 11 flight was notable for more than that, however. The VSS Unity was the first to carry more than one passenger. Branson was joined by two pilots and three Virgin Galactic employees in the flight that brought the company closer to offering commercial spaceflight.
The media coverage was huge, as Branson managed to win the race against fellow billionaire Jeff Bezos. the Amazon (NASDAQ:AMZN) The founder’s Blue Origin program launched Bezos into space just nine days after Branson’s flight.
With all the buzz around the flights, you’d think SPCE stock would be the beneficiary. But it didn’t work that way.
Problems Derail Growth
Virgin Galactic began having problems even before Branson entered space. A New Yorker The article details that the VSS Unity veered off course about a minute into its flight, with yellow and red warning lights flashing throughout the cockpit as the craft accelerated to Mach 3.
Luckily for Branson and the three other crew members in the back, the pilots got the ship into space and landed safely. But data extracted from Flightradar24 shows that the vehicle is flying outside of its designated airspace. An FAA spokesperson confirmed that Virgin Galactic “deviated from its air traffic control clearance” and that an “investigation is ongoing”.
The FAA founded Virgin Galactic during the investigation and said the company did not communicate the issue to regulators. He gave the company permission to fly again at the end of September. For its part, Virgin Galactic said it would “expand protected airspace for future flights” to have a “variety of possible flight paths.” He also said he would improve his communication with the FAA.
But that’s not all. Also in September, Virgin Galactic announced that it would delay its first commercial space mission with the Italian Air Force due to a possible manufacturing defect discovered in a component of the flight control system.
Then, in October, the company announced that it would push back the start of its commercial flights to the fourth quarter of 2022. It said the delay was necessary because it discovered that the materials used in the spacecraft’s seals were showing a “reduction resistance” and required additional inspections.
SPCE Stock at a Glance
As of this writing, SPCE stock is trading at just over $10 per share. Its all-time high of $62.80, set in early February, is a distant memory. And shares are down 18% in the past two days alone after the company announced it would raise $425 million to $500 million in debt to “fund working capital, general and administrative matters and capital expenditures.” capital to accelerate the development of its spacecraft fleet to facilitate high-volume commercial service.
Third quarter earnings were actually not that bad. The company reported revenue for the second consecutive quarter, reporting $2.6 million versus $1.8 million expected by analysts. And although Virgin Galatic reported a net loss of $48 million, this was lower than the net loss of $92 million in the third quarter of 2020.
Virgin Galactic also said it ended the third quarter with approximately $1 billion in cash, which includes cash and cash equivalents of $721 million.
The basics of SPCE shares
The dream, of course, is commercial spaceflight. Virgin Galactic is selling shareholders the idea of space tourism, or spaceflight for the masses. It is an expensive dream. In August, the company began taking reservations at $450,000 a pop for 1,000 seats on future flights. By the end of the third quarter, about 700 had been sold.
The trick, of course, is to sell the public (as well as passengers and federal regulators) on the safety of Virgin Galactic vehicles. SPCE’s actions cannot afford the company to make missteps or take shortcuts when it comes to passenger safety.
At the same time, the specter of competition is very real. Bezos’ Blue Origin has arguably as much potential – if not more – than Virgin Galactic. It’s easy to see a scenario where SPCE stock gets left behind.
Either way, Virgin Galactic is teetering right now and there’s no clear indication that it will bounce back anytime soon. Trade with caution.
At the date of publication, Patrick Sanders held (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.
Patrick Sanders is a freelance writer and publisher in Maryland, and from 2015 to 2019 he headed the investment advice section at US News & World Report. Follow him on Twitter at @ 1patricksanders.