On Virgin Galactic’s Unity 22 spaceship, Richard Branson and his crew touched the edge of space on Sunday.
Virgin Galactic provided this image.
Size of the text
The shares of Richard Branson’s Virgin Galactic plummeted on Monday morning, a day after the business completed the world’s first space tourism flight. That isn’t as strange as it appears. Stocks in
Virgin Galactic is a company that specializes in space travel
(ticker: SPCE) jumped 217 percent in the two months leading up to Sunday’s trip, and was up around 9% in premarket trading on Monday. On Monday, though, the stock dropped 17.3 percent to $40.69. The
S&P 500 Index
and
The Dow Jones Industrial Average is a stock market index that measures how well
Closed at all-time highs, with each stock up more than 0.3 percent.
Given the company’s accomplishment on Sunday, the stock’s move seems strange. In a competition between billionaires that has enthralled investors, the historic voyage to the edge of space opened up a new frontier for commercial space travel. The company’s astronaut log was signed by Founder Branson as astronaut 001. Part of the reason for the drop could be Virgin Galactic’s intention to sell more stock. Virgin Galactic will sell up to $500 million in common stock, according to a Securities and Exchange Commission filing on Monday. Investors dislike having their holdings diluted. However, the stock’s rise could simply be a case of an old Wall Street proverb that says, “Buy the rumor, sell the news.” It’s crucial to remember that the market is always looking ahead, and news from tomorrow will be discounted today. That’s why, when things don’t go as planned, stocks make significant, abrupt moves. Earlier this year, something similar occurred. In early May, Virgin Galactic’s shares plummeted due to unexpected test delays, leaving investors in the dark about when testing would resume. Without warning, testing resumed, and shares soared. Then came the news of Branson’s test flight. Between the announcement of the flight on July 1 and this past Friday, shares gained roughly 7%. The stock has dropped approximately 4% since the trip was announced, according to Monday’s decrease. Despite this, Galactic stock has increased by nearly 25% in the last month. Selling the news does not imply that a group of traders is selling stocks. Now that Virgin Galactic’s huge catalyst has gone, there are simply no more purchasers willing to pay higher prices for the shares on Monday. The reduction has nothing to do with Virgin Galactic’s long-term strategy. This will be determined by Galactic’s ability to expand space tourism. “Creating a successful space tourism market will be a primary focus for the company [in the coming years],” Canaccord analyst Ken Herbert told Barron’s on Sunday.
Virgin Galactic shares are rated Buy by Herbert, with a $35 price target. When Galactic stock was about $27 a share in May, he set that price objective. Galactic stock is still up more than 80% year to date, and the stock price already reflects most of the company’s achievements. The successful journey represents a watershed event in the race for space tourism, but there will be many more to come.
Amazon.com
Jeff Bezos, the company’s founder, plans to fly to the edge of space in his Blue Origin New Shepard spaceship on July 20. There will be more rivalry in the future, as
Tesla
Elon Musk, the company’s CEO, is preparing a series of SpaceX missions, the first of which will take passengers on lengthier journeys in September.
Callum Keown can be reached at callum.keown@dowjones.com./n
