Virgin Galactic is having its worst 1d performance ever, following 204% 7d rally

Shares of billionaire Richard Branson’s private space company Virgin Galactic plunged 40% on Tuesday. It was the stock’s steepest one-day decline since it began trading publicly, MarketWatch reports. The previous record was set back in 2020.

The sharp drop followed an extraordinary rally that saw the stock more than triple, gaining 204.5% in just seven trading sessions between May 20 and Monday’s close, Bloomberg and MarketWatch noted.

Tuesday’s selloff was triggered by a filing the company submitted to the U.S. Securities and Exchange Commission stating that it plans to issue new common stock to partially repay debt tied to its notes, totaling up to $30.5 million. In doing so, Virgin Galactic sought to take advantage of the significant appreciation in its share price, MarketWatch noted.

Existing shareholders typically do not welcome the issuance of new shares because it dilutes their ownership stakes by increasing the number of shares outstanding, MarketWatch explained. The issuance of $30.5 million worth of common stock would represent roughly 6.5% of the company’s current market capitalization of $467.7 million, according to MarketWatch calculations.

There is a positive side, however: if Virgin succeeds in fully redeeming the debt with stock, its next principal payment will not be due until March 31, 2028, MarketWatch added, citing the SEC filing.

Before Tuesday’s decline, Virgin Galactic shares had been surging alongside the broader space sector after Elon Musk’s SpaceX filed for an IPO, as noted by MarketWatch and Bloomberg. The rally was also supported by the company’s reaffirmed timeline for launching its new SpaceShip vehicle and by its first flight test in two years, Bloomberg added.

The rally was further boosted after investor Rich Huang and his firm RichRich Capital disclosed their stakes in the company, MarketWatch reported. As of Friday, Huang owned a 5.26% stake in Virgin Galactic, while RichRich Capital held 4.62%.

At the same time, S3 Partners attributed the stock’s surge to a short squeeze, Bloomberg wrote. Investors betting against the stock were forced to buy shares to close their positions. Unrealized losses among short sellers reached $64 million this year, Bloomberg added, citing S3 Partners data.

Virgin Galactic aims to generate revenue from space tourism. The company completed seven commercial spaceflights, with the most recent mission taking place in June 2024. It then shifted its focus to developing its new SpaceShip vehicle.

The company plans to conduct the spacecraft’s first spaceflight in the fourth quarter. Virgin Galactic expects to operate four flights per month in January 2027 before increasing that pace to eight flights per month by the second quarter of 2027, CFO Douglas Ahrens said.