Shares of Virgin Galactic fell sharply after Richard Branson announced that there would be no additional funding for the company.
The value of stocks in the company Virgin Galactic, which specializes in space tourism, dropped significantly on Monday following the announcement from its founder, Sir Richard Branson, that he would not be providing any additional financial support.
In a recent interview, the British billionaire caused concern among investors when he claimed that the unprofitable company has sufficient funds to sustain itself. This announcement comes after the company’s previous announcement of staff reductions and a temporary halt in commercial flights starting next year, as part of their cost-saving measures.
The Virgin Group, owned by Branson, has divested over $1 billion in shares of Virgin Galactic since its public offering four years ago. The company’s Virgin Investments arm now holds approximately 7.7% of the business, making it the second largest shareholder.
When asked if he would invest more money into the company, Branson responded to the Financial Times by stating that due to the financial impact of Covid, they do not have a large reserve of funds. He also noted that Virgin Galactic currently has approximately $1 billion, which he believes is enough to sustain the company’s operations independently.
The billionaire’s statement was released this past weekend. When the New York stock market opened on Monday, the value of Virgin Galactic’s shares dropped significantly. By late morning, they had fallen by 17.5% to $1.94.
In 2004, at the age of 73, Branson created Virgin Galactic with the goal of bringing commercial space travel to fruition. The company’s stock experienced a significant increase after being listed on the New York Stock Exchange in 2019, but has since declined as investors reevaluated its potential. Branson himself was present on a test flight that reached the edge of space two years ago.
However, in order to develop the larger Delta spacecraft, Virgin Galactic requires a substantial amount of funding. These spacecrafts are not projected to be operational until 2026. Michael Colglazier, the president and CEO of the company, informed employees in November that these Delta ships are crucial for economic growth. He also stated that in order to successfully launch these ships, they must strengthen their financial stability and decrease their dependence on volatile capital markets.
“We have the goal of achieving this, but it will involve shifting our focus and resources towards the Delta ships, while also making our work outside of the Delta program more efficient and less time-consuming.”
Analysts on Wall Street are questioning if and when the company will need to seek additional funding from investors. Branson has recently stated that he has no intention for Virgin to supply funds.
Earlier this year, a space company called Virgin Orbit, which is owned by a billionaire and specializes in satellite launches, declared bankruptcy due to a lack of new funding and financial difficulties. This resulted in the loss of jobs for hundreds of employees.