Virgin Galactic: From Space To The Stock Market

This week, Virgin Galactic, the space tourism company launched by billionaire Sir Richard Branson in 2004, made its first appearance on stock markets. Virgin Galactic Holdings began trading on Monday, October 28 on the NYSE as SPCE.

Over 9 million shares changed hands on October 28. The stock, which hit a high of 12.93 on its launch date, has since fallen back to earth somewhat, closing on October 30 at 10.61. The stock price is a fraction of the $250,000 cost to consumers of a future Virgin Galactic flight.

“Today is the start of a new era for the human spaceflight industry,” said Virgin Galactic CEO George Whitesides, in a statement timed to the beginning of stock trading. “Now that VG is a publicly traded company, anyone can invest in a human spaceflight company that is striving to truly transform the market and be part of the excitement of the commercial space industry.”

The company did not reach stock market “orbit” as a hot IPO, but through a reverse merger with Social Capital Hedosophia. “The company is to all intents and purposes a pre-revenue startup; it just happens to be public having merged with a listed cash shell,” according to Seeking Alpha, which rated the company Neutral. “Right now it has no fundamentals – no revenue, no earnings, no commercial operations.”

What Virgin Galactic does have is 15 years of research and development in manned suborbital flight. These tourist jaunts are based on a reusable vehicle being launched from a mothership and zooming up to 300,000 feet.

Virgin Galactic says there is a path to profit, from such space tourists flights according to a presentation to the Securities and Exchange Commission reviewed by Space.com. Projections included a $104 million loss in 2020 while Virgin Galactic launches its space tourism program, near break-even operations by 2021 and a projected $274 million in earnings by 2023.

So what, exactly, is Virgin Galactic selling? It’s not just a couple of weightless minutes in space, but the experience of it all, a concept that millions of potential Millennial customers apparently crave.

As a Virgin investor relations release put it, “Using its proprietary and reusable technologies, and supported by a distinctive, Virgin-branded customer experience, [Virgin] is developing a spaceflight system designed to offer customers a unique, multi-day experience culminating in a spaceflight that includes several minutes of weightlessness and views of Earth from space.”

To get customers there, Virgin Galactic has developed its reusable SpaceShipTwo spaceflight system. It consists of WhiteKnightTwo, a custom-built, four engine, dual-fuselage carrier aircraft. At 45,000 feet, WhiteKnight will launch its load, SpaceShipTwo, for a rocket-powered journey to the edge of space.

SpaceShipTwo is a reusable, winged spacecraft designed to carry eight people (including two pilots) into space. It’s powered by a hybrid rocket moter which Virgin Galactic says combines the simplicity of a solid-fuel motor with the easier control of a liquid rocket motor. SpaceShipTwo’s wings and tail booms are designed to rotate upwards while in space, “feathering” like a badminton shuttlecock to help create a safe glide to re-entry.

The prospect of the experience around of space flight has excited many. More than 600 people, reportedly including Brad Pitt and Angelina Jolie, have put down a combined $80 million in deposits on prospective $250,000 spaceflights.

However, Seeking Alpha notes that “The space tourism company isn’t due to begin operations until June of 2020.” If true, that will be twelve years, and well over a billion dollars in investment, after an originally announced date of 2008.

Is there a market for what Virgin Galactic is offering? According to the Swiss investment bank UBS, the space tourism industry will grow by more than 10% a year to be worth about $3 billion dollars by 2030. 

As an investment, a company with no revenue and no track record of sending “astronauts” into space is certainly highly speculative. But potential investors might find it interesting to note that Boeing recently put $20 million into the company as well. A Boeing spokesperson said its work with Virgin Galactic “will help unlock the future of space travel and high-speed mobility,” potentially pointing towards high-speed international travel.

Or, as the irrepressible Sir Richard Branson put it, “This is the beginning of an important collaboration for the future of air and space travel, which are the natural next steps for our human spaceflight program.”