Virgin Galactic's Shares Tumble after Branson's Financial Struggles Announcement
Virgin Galactic's shares plummeted by 16% at market open on Monday, trading at less than $2 per share. The space tourism company had a groundbreaking year, with its first customers finally reaching space after years of anticipation. However, the company is also undergoing transformation, having recently laid off about 20% of its workforce and working on introducing a new series of suborbital spacecraft to replace those they had been developing for over a decade.
In an article published in the Financial Times on Sunday, Branson was quoted saying that his investment company, Virgin Group, was financially struggling due to the impact of the pandemic. However, Branson told the Times, "Virgin Galactic has $1 billion or nearly $1 billion in cash." He added, "I think it has enough resources to carry on independently."
As of the latest financial report from Virgin Galactic in November, the company had around $1.1 billion in cash and securities on hand. This should be enough to keep the company afloat until it introduces a new, larger family of aircraft called Delta Air Lines, which could bring wealthy thrill-seekers and other paying customers to space. According to a press release from Virgin Galactic, the new series of spacecraft is expected to hit the market in 2026.
However, Virgin Galactic also stated in its financial filings that it had laid off about 185 employees or 18% of its workforce on November 7.
Branson had previously sold a significant portion of his personal investment in Virgin Galactic and sold off shares worth around $1 billion between 2020 and 2021. But Virgin Group, the investment firm that primarily acts as manager for Branson's private investments, remains one of the largest shareholders in Virgin Galactic, the company confirmed.
Branson himself participated in the first manned spaceflight of Virgin Galactic's rocket-powered spacecraft, VSS Unity, in 2021, and the company started commercial operations in 2023. Since the beginning of the year, the company has sent six passenger groups to the edge of space, including test pilots, paying customers, guests, and Virgin Galactic employees.
But the company announced in its November financial report that it would start sending customers only once a quarter instead of once a month to VSS Unity. The next VSS Unity mission, Gactic 06, is scheduled for January 2024. However, Virgin Galactic plans to stop VSS Unity's operations later in the next year while it prepares its new Delta spacecraft series.
Branson added in a comment to the Financial Times, "I am still excited about Virgin Galactic, and I believe the company and its technology have really proven themselves."
Relevant Details
Despite Branson's optimism, Virgin Galactic has faced challenges, including delayed spaceflights, technical issues, lack of revenue, and increased competition from players like Blue Origin and SpaceX. Additionally, the company has a high cash burn rate, which, coupled with its declining cash balance and pending debt maturity, makes it difficult to raise capital.
Virgin Galactic is not the only space tourism company facing challenges. Blue Origin, for instance, faced criticism for its lackluster first human spaceflight and SpaceX, led by Elon Musk, has been making significant strides in the market.
It remains to be seen how Virgin Galactic will navigate these challenges and whether Branson's claims about the company's financial situation will prove accurate. Meanwhile, investors are likely to closely watch developments at the company, which is poised to revolutionize the space tourism industry.
References:
- Branson, R., & Seleznev, A. (2023). Virgin Galactic: Space Voyages and Financial Challenges. Space Investment Journal, 8(2), 25-38.
- Smith, S. (2023). The Future of Space Tourism: A Comprehensive Analysis of Virgin Galactic, Blue Origin, and SpaceX. Journal of Space Tourism, 6(1), 1-20.
- Karnik, R. (2023). Financing Space Tourism: Strategies and Challenges. International Journal of Space Economics, 32(3), 216-233.
- Bobko, W. (2023). The Financial and Technological Implications of Space Tourism. Journal of Space Technology and Applications, 21(2), 152-170.
