Shares of the space exploration company Virgin Galactic Holdings (NYSE:SPCE) have been volatile for most of 2020. SPCE stock initially shot up in February, when investors were hopeful that the company would shake up the travel industry.
But then the stock plummeted in March as the novel coronavirus pandemic caused the global economy to come to a standstill. Since then, the stock has had its share of ups and downs, but isn’t showing any sign of returning to its February high.
The company was able to get a boost from the positive momentum surrounding the SpaceX launch, but it was short-lived. Over the past week, the shares have been trading slightly lower, especially after CEO Richard Branson announced he was selling additional shares of the stock.
An Overview of Virgin Galactic
Virgin Galactic has had plenty of shakeups since it went public in October 2019. This is partly due to the fact that it’s unclear what the company’s future earning prospects are.
Virgin Galactic plans to bring space tourism to the masses, but it remains to be seen whether consumers are willing to pay $250,000 per ticket to travel into space. Investors will have a better idea of what the company’s prospects are once it begins offering flights later this year.
Last week, SPCE stock took a hit after CEO Richard Branson filed to sell some of his shares. This isn’t the first time Branson has sold shares of the company.
In May, the Wall Street Journal reported that Branson planned to sell up to 25 million shares of the company. The two separate sales generated $500 million and reduced Branson’s stake in the company by about 22%.
Selling these shares strips Branson’s control of the company, taking his stake down from 59% to about 45%.
Why Did Branson Share Sells of SPCE Stock?
This move was likely made to protect Branson’s vast business empire which has been negatively impacted by the coronavirus pandemic. Branson currently owns the airlines Virgin Atlantic and Virgin Australia, as well as small satellite company called Virgin Orbit.
According to an SEC filing, “Virgin Group intends to use any proceeds from sales of our common stock pursuant to the distribution agency agreement primarily to support its portfolio of global leisure, holiday and travel businesses that have been affected by the unprecedented impact of COVID-19.”
In fairness, Branson also raised money against his Caribbean hideout, Necker Island. Even still, it never looks good to see the owner selling shares of his own company.
All of Branson’s luxury travel businesses have been hit hard by the pandemic, especially Virgin Atlantic. Branson has requested financial assistance from the British government, but the U.K. has yet to respond to his request.
And so far, the British government doesn’t seem inclined to oblige his request for help. British lawmaker Diant Abbot recently tweed, “Branson has not paid tax in this country for 14 years.”
The Bottom Line on SPCE Stock
At this point, there doesn’t seem to be a lot of good news about SPCE stock to point to. The company recently released its first-quarter earnings which showed that it lost $60 million. And its revenue fell more than 87% to $238,000.
Branson seemed to realize how grim things appear financially when he wrote this in a March blog post: “This is the most significant crisis the world has experienced in my lifetime. Because many of our businesses are in industries like travel, leisure and wellness, they are in a massive battle to survive and save jobs.”
However, the company does have potential and there’s a chance many customers will be excited to get on board with space tourism. Time will tell if the company can make good on its promises. Until then, it’s probably a good idea to hold off on investing.
Jamie Johnson is a personal finance freelance writer and has been writing for InvestorPlace since mid-2019. She writes for a number of other well-known financial sites, including Credit Karma, Quicken Loans, and Bankrate. As of this writing, Jamie Johnson did not hold a position in any of the aforementioned securities.
