Fresh off founder Richard Branson’s long-awaited trip to space, Virgin Galactic has announced a potential $500 million shares sale.
After 17 long years of innovation and many, MANY delays, Richard Branson and Virgin Galactic (NYSE: SPCE) finally went to space.
So why on earth is its stock price crashing back to earth.
Why is Virgin Galactic selling $500 million in stock?
Space is expensive. From literal rocket fuel and near-indestructible equipment to pressurized suits and numerous insurance waivers. And that’s just the surface.
Virgin Galactic intends to become commercially viable in 2022, and while that means actual, tangible revenue, it also means a lot more overhead. And to get there, Virgin Galactic needs money. With its stock price up circa 80% in 2021 so far, SPCE is cashing in on some of that popularity.
These funds will be used to innovate and get the company ready for its commercial business launch next year — something investors have waited a long time for.
So why is its price dropping, investment is a good thing, right?
Well, investors appear spooked by the fact that Virgin Galactic is planning to sell off roughly 4% of its business. So spooked, that they have allowed this pessimistic feeling to outweigh the clear win that was Sunday’s successful test flight.
Virgin Group and Branson still own the largest stake in the business at 27%, and this $500 million sale is unlikely to hinder any of its long-term potential plans. In fact, it will make innovation possible without increasing company debt.
While SPCE still comes with plenty of risks, it’s best to ignore such short-term volatility, as there will be a lot more to come in the near future. For now, celebrate Virgin Galactic’s success and keep an eye on the business’s exciting 2022 schedule.
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