Virgin Galactic Stock Heads Back to Earth after Branson’s Historic Flight

Shares of Virgin Galactic (NYSE: SPCE) crashed back down to Earth on Monday after the company successfully completed a test flight over the weekend that safely carried billionaire founder Sir Richard Branson to the edge of space and back. It was the first fully crewed spaceflight Virgin Galactic has completed, with six crew members (including Branson) aboard the Unity 22 mission.

Despite the historic milestone, Virgin Galactic stock was down by 15% as of 12:45 p.m. EDT in what appears to partly be a classic “buy the rumor, sell the news” event.

To infinity and beyond

Virgin Galactic shares had been soaring ahead of the launch, especially after the company announced that it had secured regulatory approval from the Federal Aviation Administration (FAA) to conduct commercial flights in the first such license that the agency has ever granted.

The successful flight is a monumental step towards commercialization. The company had initially planned to charge affluent consumers $200,000 per ticket before raising the price to $250,000 per ticket. CEO Michael Colglazier has suggested that the cost could potentially increase further. Analysts believe that the ultimate cost for a ticket to space could be in the range of $400,000 to $500,000.

“With each successful mission we are paving the way for the next generation of astronauts,” Colglazier said in a statement on Sunday regarding the flight. “I want to thank our talented team, including our pilots and crew, whose dedication and commitment made today possible. They are helping open the door for greater access to space—so it can be for the many and not just for the few.”

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Raising cash from investors

Another contributing factor for Monday’s decline is a stock offering that Virgin Galactic filed following the successful test. The company made a regulatory filing outlining an “at-the-money” (ATM) offering that it will conduct through financial institutions in order to raise up to $500 million in fresh capital. In an ATM deal, investment banks quietly sell stock into the market at prevailing prices in order to raise money for the company.

Developing spacecraft is a fairly capital-intensive endeavor, and Virgin Galactic is leveraging the positive media coverage from the flight to raise cash. However, the stock offering will be dilutive to existing shareholders.

Virgin Galactic estimates that there will be approximately 247.4 million shares outstanding after the offering is completed, assuming that the company can sell around 10.2 million shares at a price of $49.20. The actual number of shares sold and the price at which those shares are sold will depend on market conditions.

Branson wins the race

The flight comes just days before Jeff Bezos is scheduled to fly to space aboard a rocket made by his startup Blue Origin. The billionaires have been locked in a modern space race, and Bezos had previously announced that he would fly on July 20. Branson has successfully upstaged Bezos by reaching the edge of space first.

The missions will differ in several important ways. Blue Origin’s New Shepard rocket will reach a higher altitude, although Virgin Galactic’s SpaceShipTwo allows passengers to experience zero gravity for a longer period of time.

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