Space is the final frontier — and it looks to stay that way after Richard Branson ruled out further investment in Virgin Galactic (NYSE:SPCE), his troubled space tourism company. Shares of SPCE stock have fallen more than 15% today after Branson, who helped found Virgin Galactic and take it public in an early special purpose acquisition company (SPAC) deal, said he was tapped out.
SPCE stock opened today at $1.98 per share and a market capitalization of around $800 million.
SPCE Stock: A Failure to Launch Profitably
Virgin Galactic came public in 2019 as one of the first SPAC deals of the recent SPAC craze. The company partnered up with Chamath Palihapitiya’s Social Capital Hedosophia.
SPCE stock enjoyed support in 2021, rising to well over $50 per share. Once the Federal Reserve began raising interest rates, however, capital became harder to come by. Equity investment now must compete for capital with bonds that offer a solid return. This is as true for Branson’s empire as it is for anything else. Branson told Financial Times that he no longer has the “deepest pockets” but that Virgin Galactic can succeed on its own.
Morgan Stanley gave up on Virgin Galactic a few weeks ago, giving SPCE stock an “underweight” rating. At the time, I wrote that the company didn’t appear to be a viable business. Branson’s Virgin Investments is still the second-largest investor in the company, coming in just behind State Street (NYSE:STT) with an 8.37% holding.
Virgin Galactic says that it will retire its current space plane, called Unity, in 2024. Unity has been used for suborbital research during its service.
Looking forward, the company has been working on a new plane for launch in 2025. It claims that the Delta class space plane will be able to carry six passengers instead of four as well as “require less maintenance between flights,” launching as much as twice a week instead of once per month.
What Happens Next?
The fate of the Delta space plane is now up in the air, but Virgin Galactic remains in business. The firm ended September with $1.1 billion in cash after losing $105 million during the third quarter.
On the date of publication, 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.
