Virgin Galactic Stock: Mission Not Accomplished

Virgin Galactic (NYSE:SPCE), founded by eccentric billionaire Richard Branson, offers wealthy people the chance to become astronauts for a day. The company just celebrated another successful flight, but whether Virgin Galactic stock will take flight is a whole different story.

It’s great to hear that Virgin Galactic has completed another flight mission and that all passengers and crew have landed safely. But it’s no longer 2021, and speculative assets like Virgin Galactic stock don’t have the same monthly outlook in a high-interest rate environment.

don’t celebrate too much

The concept of diminishing returns should certainly apply to Virgin Galactic’s spaceflight. The company’s first successful flight may have been a historic moment, but flight number 12 does not have the same impact.

My purpose here is not to downplay the safe and successful completion of Virgin Galactic’s 12th mission. Over the weekend, the company’s Unity spacecraft landed as part of the Galactic 07 flight.

Virgin Galactic CEO Michael Colglazier described Unity’s final commercial flight as “remarkable” and celebrated “an unprecedented achievement in human spaceflight.”

Now that Virgin Galactic is retiring its Unity spacecraft, it is preparing to launch its next-generation spacecraft model called the Delta Class.

Stargazers won’t be seeing Delta class ships flying anytime soon. Virgin Galactic’s first Delta-class vessel for commercial service is expected to launch in 2026, according to a press release.

It took a long time for Unity to end and Delta Class to begin. This raises questions about how Virgin Galactic plans to generate significant revenue and earnings in the meantime.

I certainly don’t mean to suggest this is a “so what?” It’s a Virgin Galactic moment. The press release provided essential details about the scientific research conducted during Unity’s final flight.

Among those studies was a “University of California, Berkeley experiment to test new 3D printing technologies in microgravity.” Some investors may remember that just a few years ago, 3D printing was considered the next millionaire trend in financial markets.

These trends have come and gone quickly, but the story of 3D printing may not be over yet. Perhaps Virgin Galactic could revive 3D printing if it can prove its usefulness in space.

On the other hand, it is difficult to imagine that advances in 3D printing or other fields will occur quickly. Due to safety concerns and regulations, Virgin Galactic’s milestone moments must be measured in months, quarters or years.

It’s disappointing that SPCE stock, once worth about $50 per share in 2021, is now trading for less than $1. Given the stock’s constant decline, Virgin Galactic’s investors may not have the time or patience to wait for slow-moving scientific progress.

Threats of delisting and cash consumption issues

The plunge in Virgin Galactic stock isn’t just disappointing. This is truly problematic. This is because the New York Stock Exchange (NYSE) has a rule that prohibits listed stocks from trading below $1 for an extended period of time.

Therefore, the NYSE sent Virgin Galactic a delisting notice because its stock had been trading below $1 for more than 30 consecutive days. Virgin Galactic then notified the NYSE of its intention to return to compliance with the stock price minimum rule.

To regain compliance, Virgin Galactic plans to follow its old playbook on the topic and ask shareholders to approve a reverse stock split.

This may not necessarily be the beginning of the end for Virgin Galactic. But the company’s attempt at a reverse stock split to regain listing compliance is rarely a positive sign because it doesn’t actually solve the underlying problems.

First of all, Virgin Galactic is a consistently unprofitable company, with a net loss of $102 million in the first quarter. Moreover, the company has a rapid rate of cash burn, as evidenced by negative free cash flow (FCF) of $126 million in the first quarter of 2024.

Analysts expect Virgin Galactic to burn through an additional $126.9 billion this quarter. However, the company considers the issuance of 5.1 million new shares to generate capital in the first quarter a “financial highlight.”

At least more rich people will be able to spend an hour or two in space by 2026. To subvert the famous Neil Armstrong quote, I believe this would be one small step for man and a huge disappointment for Virgin Galactic’s shareholders.