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Why Virgin Galactic Stock Sank Back to Earth Today

The Motley Fool logo The Motley Fool 7/12/2021 Howard Smith
Richard Branson et al. standing around a plane: Why Virgin Galactic Stock Sank Back to Earth Today © Provided by The Motley Fool Why Virgin Galactic Stock Sank Back to Earth Today

What happened

The market drove shares of Virgin Galactic Holdings (NYSE: SPCE) up last week in anticipation of the space tourism company's test flight this weekend. Today's action is more of a Monday hangover, with shares down about 11% as of 10:20 a.m. EDT after the company announced plans to raise fresh capital.

So what

The historic flight with billionaire founder Sir Richard Branson aboard was successful, and shares even spiked again to start today's session. But while the VSS Unity's mission was exciting and made headlines as part of the "billionaire space race," investors are selling shares today after the company announced a new common share offering. 

a group of people standing around a plane: Sir Richard Branson was aboard the latest VSS Unity test flight. © Virgin Galactic Holdings Sir Richard Branson was aboard the latest VSS Unity test flight.

Now what


Video: Virgin Galactic’s VSS Unity Safely Returns to Earth (Bloomberg)

Virgin Galactic filed today to sell up to $500 million in new common shares. The company said it plans to use the funds for general corporate purposes, including "capital expenditures for its manufacturing capabilities, development of its spaceship fleet and other infrastructure improvements."

This weekend's flight with Branson aboard came after the Federal Aviation Administration (FAA) gave approval on June 25 for a full commercial license to operate the company's spacecraft with passengers.  

At its latest count, the company said it had 600 reservations booked for future astronauts to visit the edge of space, more than 50 miles above Earth. Tickets cost in the neighborhood of $250,000 for the ride. Today's filing to raise new capital represents almost 5% dilution at the company's current market cap. That dilution has investors locking in profits today after the stock had gained almost 50% in June alone. 

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Howard Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Virgin Galactic Holdings Inc. The Motley Fool has a disclosure policy.

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