Virgin Galactic’s stock fell on Monday after the firm announced plans to sell up to $500 million in common stock. This comes after the successful test of the commercial spaceflight by the company’s founder, Sir Richard Branson.
This stock, which trades under the ticker SPCE, fell more than 14% after the company filed a notice of its stock sale offering with the Securities and Exchange Commission. Due to volatility, Virgin Galactic trading was temporarily suspended on Monday morning.
Around 12:15 p.m., the stock traded at $42.25. After gaining as much as 7% in premarket trading, ET. In anticipation of this progress toward commercial service, the stock has risen more than 76% so far this year. However, the stock saw its decline worsen to 17.5% at the time of writing this article.
On Sunday, the company’s spacecraft, VSS Unity, took to the sky above New Mexico, steered by two pilots, carrying the billionaire founder and five Virgin Galactic employees. In a trip to the brink of space, the VSS Unity activated its rocket engine and raced to more than three times the speed of sound.
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The business conducted its fully crewed test flight into suborbital space, marking a significant step forward in the commercial space race and a step closer to its objective of commercial service in 2022.
The VSS Unity from Virgin Galactic can carry up to six passengers in addition to the two pilots. About 600 tickets for future trips have been reserved, with prices ranging dancing around $250,000 each. While passenger ticket sales have yet to be announced, Analysts at AB Bernstein anticipate a higher price range of $400,000 to $500,000.
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Why Virgin Galactic stock fell
Following a stunningly swift price rise, Bank of America gave Virgin Galactic stock a remarkable double downgrade–from Buy to Sell. It serves as a warning that, while things are looking brighter for the space tourism company, there are still risks to be aware of.
Analysts often upgrade or downgrade stocks one notch at a time, moving from Buy to Hold and Hold to Sell, respectively. After the price just surged beyond his $41 goal, Bank of America’s Ronald Epstein swung from Buy to Sell.
The FAA’s decision is significant, but analysts expected it. In his downgrade assessment, Epstein stated “We continue to see Virgin Galactic as a beneficiary of the new commercial space race, however, we believe this premium is already priced into the stock and will dwindle as more commercial space companies go public.”
There is also the presence of competition. Blue Origin, for example, is ready to launch creator Jeff Bezos, his brother, and a commercial passenger into space for $28 million. Epstein believes that investing in space is dangerous, and that investors should budget for delays and other potential bad news. After the stock’s meteoric increase, Epstein isn’t the only analyst who has downgraded it. This week, Alembic Global Advisors analyst, Peter Skibitski downgraded his rating to Hold.