the action has a problem. Every time it goes up with good news, it comes back down, and there’s a good reason for it. Being a capital intensive startup, you always need more money.
Case in point:
The shares fell more than 10% in early trading on Friday after it said it would raise up to $400 million through the sale of common shares to fund the development of its spacecraft fleet. in a Thursday Virgin Galactic (ticker: SPCE) also said the proceeds would be used to help scale its business operations.
The offer seems opportunistic. Shares have soared recently after the company announced details from his first commercial flight into space last week. He had said in a statement that Galactic 01 will fly between June 27 and 30. Prior to that announcement, the stock was trading around $4.06 and closed Tuesday at $6.01.
The shares had already given back some of the gains, closing at $5.32 on Thursday, and are now down 14% to $4.57 in premarket trading on Friday.
and
futures are down 0.4% and 0.5%, respectively.
This is just the most recent share sale, with Virgin Galactic saying in Thursday’s filing that it recently completed a $300 million “on the market” offering. That the company continues to sell shares should come as no surprise. Virgin Galactic ended the first quarter with approximately $900 million in cash and securities on its books. That’s a healthy balance, but Wall Street expects the company to use up to $2 billion over the next four years to build its business.
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The company did not immediately respond to a request for comment on the timing of the additional capital increases or whether any would be needed.
The problem is that analysts don’t project positive free cash flow until near the end of the decade, when annual sales are projected to exceed $700 million. Sales in 2023 are expected to be around $11 million.
This is the first year of business operations for the company. The start of commercial flights has taken longer than investors expected. In July 2021, when founder Richard Branson and others completed a test flight, the shares were trading around $50. But a series of technical and regulatory issues since then have led to delays.
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As exciting as it is to see Virgin Galactic stock come up with good news, keep in mind that another stock sale could be just around the corner.
Write to Rupert Steiner at rupert.steiner@barrons.com and Al Root in allen.root@dowjones.com
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