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Virgin Galactic Stock Tumbles After Test Flight Failed To Reach Outer Space

Pilots and spaceship made a ‘perfect’ landing, but rocket motor didn’t fire. Virgin Galactic Stock Tumbles After Test Flight Failed To Reach Outer Space

Shares of Virgin Galactic Holdings Inc. tumbled Monday, after the space travel company said a recent test flight failed to reach space as planned, but did land safely.

The stock SPCE, -17.38% sank 15.1% in active morning trading. Volume reached 12 million shares with the first 15 minutes after the open, compared with the full-day average of 13.6 million shares.

The stock has now dropped 19.4% since it closed at a near 10-month high of $33.80 on Dec. 7.

The company said that during a test flight launched on Dec. 12, the rocket motor “did not fire due to the ignition sequence not completing,” keeping the flight from reaching space.

The flight landed safely as planned at Spaceport America in New Mexico.

“Our flight landed beautifully, with pilots, planes and spaceship safe, secure and in excellent share — the foundation of every successful mission!” said Virgin Galactic Chief Executive Michael Colglazier.

Virgin Galactic said a preliminary analysis indicated that the onboard computer which monitors the propulsion system lost connection, which triggered a fail-safe scenario in which the ignition of the rocket motor was intentionally halted.

“We remain focused on the test flight program we have previously announced, beginning with ta repeat of this test flight, which included two pilots and NASA payloads,” Colglazier said. “This will be followed by another test flight which will include mission specialists in the cabin. And following that flight, we will have another test flight which will include our founder, Sir Richard Branson.”

Virgin Galactic’s stock has still run up 56.4% over the past three months and rocketed 135.5% year to date. In comparison, the S&P 500 index SPX, -0.44% has advanced 9.2% over the past three months and 14.3% this year.

Updated: 5-11-2021

Richard Branson Is Outgunned In Billionaire Space Race

Virgin Galactic’s effort to hold its own against Elon Musk and Jeff Bezos looks increasingly underpowered.

Becoming a public company brings much more scrutiny, and placating investors is doubly difficult when a business isn’t yet generating meaningful revenue (as several start-ups backed by special purpose acquisition companies have found out).

Imagine, though, being a novice listed business trying to complete a suborbital space-travel test program in the midst of a global pandemic while two of the world’s richest people, Elon Musk and Jeff Bezos, are busy advancing their own rocket endeavors. This is the competitive pressure on Virgin Galactic Holdings Inc. No wonder it’s wilting.

On Monday evening Richard Branson’s space tourism venture said it was reviewing the timing of its next flight test after discovering unspecified “fatigue and stress” on the airplane used to carry the spacecraft aloft.

It will know next week whether this means yet another delay to the billionaire’s 17-year quest to carry paying passengers to suborbital space. The shares fell 8.5% in regular trading.

While Branson’s ambition — and the bravery of his pilots — is admirable, the stock market tends to think in quarters not light years. With more than $600 million in cash on hand, Virgin Galactic doesn’t face an immediate shortage. But Branson is reducing his stake, reliability issues are a concern and new spaceship investments are pending. The company doesn’t look well enough equipped to hold its own against Musk and Bezos.

Virgin Galactic’s stock almost trebled at the start of the year, helped by Cathie Wood’s Ark Investment announcing a space-themed ETF. But the Robinhood crowd have since retreated as the markets have rotated out of unprofitable tech stocks.

The company’s share-price decline since a February peak is poised to exceed 70%, although the stock is still far higher than the $10 price at which Branson agreed to take the business public in 2019 — by merging it with Chamath Palihapitiya’s SPAC, Social Capital Hedosophia.

Virgin Galactic hasn’t conducted a successful space flight since early 2019. A new book has shed more light on the delay-plagued test program, including worrying safety lapses in 2019. Virgin Galactic declined to comment on why these issues weren’t previously disclosed to investors.

When it joined the stock exchange in 2019 it predicted commercial services would begin the following year. The first paying customer won’t now fly until 2022. Analysts have had to continually revise lower their sales expectations, compared to the financials Virgin touted during the SPAC merger. It’s another reminder why the financial projections that SPACs are permitted to publish shouldn’t be relied upon.

Virgin Galactic has appointed a new chief executive officer, chief financial officer and head of engineering in the past 12 months.

Given the technical issues, it’s hard to have confidence in its plans to offer multiple daily flights, or in its ambitions to develop hypersonic aircraft for international travel.

Branson’s company took advantage of its buoyant share price by tapping investors for an additional $460 million last year. It still looks like the poor relation: Musk’s SpaceX has raised billions of dollars of private funding and Bezos sells about $1 billion of Amazon stock yearly to fund his space ambitions.

In contrast, Branson has sold his space stock to fund his terrestrial interests. His latest $150 million Virgin Galactic stock sale cut his stake to 24% and brought the total that Virgin Group-controlled entities have cashed out since 2019 to roughly $1 billion, by my calculation — similar to his total investment in the company.

Palihapitiya netted more than $300 million by exiting personal holdings, recouping treble his initial investment. He still has indirect exposure via Social Capital Hedosophia’s roughly 7% stake.

Both men say they need the money for other things: Branson to support his pandemic-hit travel businesses, and Palihapitiya to help pay for a new investment. It’s a bad look for two major shareholders to sell so much before Virgin Galactic has completed flight testing or received Federal Aviation Administration approval.

The ambition of becoming the first suborbital space tourism company is now in jeopardy. Bezos’s Blue Origin plans to launch its first crewed mission in July and has generated huge publicity by auctioning a seat. SpaceX is already carrying astronauts to the International Space Station and has a $2.9 billion NASA contract to help land people on the Moon.

Something else separating these tycoons is that Bezos and Musk favor vertical takeoff and landing rockets, while Branson has bet on aircraft-based, horizontal takeoff and landing (a carrier jet releases the rocket-powered spacecraft at about 45,000 feet).

Investors hoped this unique technological approach would prove easier to execute. The latest setback may have them thinking otherwise.

Virgin Galactic Stock Tumbles,Virgin Galactic Stock Tumbles,Virgin Galactic Stock Tumbles,

 

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