Shares in space company Virgin Galactic (NASDAQ:SPCE) fell nearly 5% overnight after Morgan Stanley gave SPCE stock an “underweight” rating. The company has been trying to conduct “space tourism,” sending people into near space for a few minutes at a time.
Virgin Galactic is backed by serial entrepreneur Richard Branson. It went public in 2019 through a special purpose acquisition company (SPAC) put together by Chamath Palihapitiya of Social Capital Hedosophia.
The Rise and Fall of SPCE Stock
The stock closed its first day of trading at $11.93 per share. It opened on Nov. 22 at about $2 per share, representing a market capitalization of $851 million. Its current ship is called the Virgin Unity. The Unity is designed for a vertical climb to 50 miles high, giving tourists five minutes of weightlessness. The cost of that trip, which lasts just a few hours, was listed last summer at $454,000.
Branson ran the company privately for years and burned through $200 million per year, including a 2018 crash. The SPAC was seen as a last throw of the dice. I questioned the company’s strategy in 2021. I urged investors to abandon it in 2022, when it was priced at $12.80 per share.
Branson launched a second company off the space plane technology called Virgin Orbit. The idea was to launch satellites from the platform. That company achieved bankruptcy after a failed launch in January.
Virgin Galactic is not yet bankrupt. It booked $1.7 million in revenue during the third quarter, twice what it took in a year earlier. But it still lost $104 million, with negative free cash flow of $105 million.
The stock even had a pop after the SpaceX Starship rocket launch failure earlier this month. Virgin Galactic’s ship has also been used successfully for experiments in microgravity.
What Happens Next?
Virgin Galactic tried a shortcut to space flight. It finally worked after a fashion, but it doesn’t seem like a viable business.
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
