Virgin Galactic stock tanks after Richard Branson signals no more investments
Virgin Galactic stock (SPCE) dropped as much as 15% on Monday after founder Sir Richard Branson said he wouldn’t be investing any more cash into the space travel company.
Branson told the Financial Times, “We don’t have the deepest pockets after COVID, and Virgin Galactic has got $1 billion, or nearly. It should, I believe, have sufficient funds to do its job on its own.”
The billionaire founded Virgin Galactic in 2004 and helped take the startup public via a SPAC merger in 2019.
A higher interest rate environment has prompted capital-intensive space-related companies like Virgin Galactic to devise ways to survive turbulent times.
Last month the stock skyrocketed almost 20% in one day after the company announced it would cut 18% of its workforce and shift focus to a new spacecraft expected to be more profitable.
“The big move we're making here is pivoting the resources that have been being put into the Unity flights and redirecting them over to get the Delta Ships done with the cash we have on hand,” Michael Colglazier, CEO of Virgin Galactic, told analysts during the company's third quarter earnings call.
Colglazier also sounded optimistic that some of its largest expenses, such as engineering and factory infrastructure, are in the rearview mirror.
He said that "the need for cash on hand is less than you may have seen from us in the past."
Virgin Galactic may be able to weather a "higher for longer" interest rate environment better than others, given that its $450,000 flight tickets target customers with deep pockets, Andrew Chanin, founder of Procure Space ETF (UFO), told Yahoo Finance in a recent interview.
“We have seen in the past that in difficult recessionary periods, the ultra-wealthy in many cases still have the ability to spend,” said Chanin.
Virgin Galactic's stock is down about 42% year to date. Shares had rallied nearly 50% over the past month prior to Monday’s drop.
Ines is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
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