Virgin Galactic has always been a bit of a finicky stock, especially with the company suffering several setbacks in the past with its space flights.
However, the stock is on a downtrend again as company founder Sir Richard Branson is selling more stock.
So Much ABout the Space Flight
Reports confirmed that Branson had sold off $300 million worth of Virgin Galactic’s stock earlier this month. Through his Virgin Investments Group, the billionaire sold 10.4 million shares of Virgin Galactic at different prices. Branson was reported to have sold the stock to fund some of his other ventures. But, considering his capital-intensive Virgin Galactic’s operations are, a stock selloff is never a good thing.
Branson’s sale came after several financial institutions had downgraded Virgin Galactic’s stock. A few days before the sale, Morgan Stanley downgraded the stock and claimed that it was expected to fall as much as 20 percent.
Credit Suisse did the same thing. In a note to clients, the company said:
“The Virgin Group continues to be the largest single shareholder in Virgin Galactic,” Branson’s parent company said in a statement. It added that it “intends to use the net proceeds from this sale to support its portfolio of global leisure, holiday and travel businesses that continue to be affected by the impact of the COVID-19 pandemic, in addition to supporting the development and growth of new and existing businesses.”
Virgin had been on a surge after Branson’s flight in July. The billionaire beat fellow space enthusiast and billionaire Jeff Bezos to space, riding atop the VSS Unity to the edge of the Earth’s atmosphere for a few minutes.
However, financial institutions have noted that Virgin is about to enter an inactivity period. The company’s Unity 23 craft is expected to fly in September, after which its sole mothership - named Eve - will go into an eight-month maintenance period. This means that Virgin will be unable to conduct any pace flights until the summer of next year at the earliest.
It is unclear that Branson was able to pre-empt this stock downgrade, thus making his stock sale. But, this is the third time that the billionaire will sell Virgin’s stock since the company went public in 2019.
Branson sold stocks worth $504.5 million and $150.3 million in May 2020 and April 2021, respectively. Branson isn’t the only top executive to sell stock. Chamath Palihapitiya, who helped take the company public, sold all of his stake in the company back in March. Palihapitiya cashed out $213 million, although he still owns some sizable shares via an investment firm.
Virgin’s Financial Woes
The downgrades aren’t the only thing to hurt Virgin Galactic in recent times. Earlier this month, Bank of America cut its price target for Virgin’s stock by a staggering 39 percent. The bank cut its price target from $41 to $25, claiming that Eve’s long maintenance period will hurt Virgin. With no flights expected until the third quarter of 2022, Virgin is set to see lower short-term earnings estimates.
Analysts also believe that Virgin won’t have a solid shot at orbital customer travel until about 2035. The flights were previously expected to come to fruition in 2028, but a 7-year delay makes things even worse for Virgin. The space company already has no short-term catalysts due to Eve’s maintenance. Its stock will face more downward pressure around October when a stock lockup will be expiring.
But, it’s not all doom and gloom for Virgin. According to a Yahoo! Finance report, an options trader bought $17.29 million worth of stock in the company following Branson’s sale. The trader had bought the shares through a block trade, with Yahoo! Finance guessing that it could have been a hedge fund or some other large institutional player.
It will be quite interesting to see how Virgin Galactic moves on from all of this. After its successful flight, the company got a lot of hype, but even the most optimistic fans understood that this would not translate too much for it. Virgin’s vision of seamless space tourism is still a decade away at the very least.
For now, Virgin’s stock remains a long-term buy. With the company’s founder even selling off, there doesn’t seem to be much of a reason for anyone else not to.