Virgin Galactic stock tumbles to lowest in two years after debt-raising plan

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Virgin Galactic Holdings Inc. stock on Thursday looked poised to close at its lowest in two years after the company announced plans to issue more debt to fuel its space-tourism business.

Virgin
SPCE,
-15.80%
earlier Thursday said its readying a private offer of $425 million of convertible bonds maturing in 2027.

The stock fell more than 17%, set to finish at its lowest since Dec. 18, 2019, when it closed at $9.56. The stock is down 83% from an all-time closing high of $59.41 on Feb. 11, 2021.

Virgin said proceeds of the debt offering will go to fund working capital, for general and administrative matters, and capex to advance the development of its spacecraft fleet for its planned high-volume commercial service, Virgin said.

That includes upgrade work on Virgin’s VSS Unity spaceship and VMS Eve mothership as well as development and testing of its next-generation fleet.

See also: Delta Air’s results are encouraging, but sow doubt about Q1

Virgin kept its goal of starting passenger travel in the fourth quarter of this year, Canaccord Genuity analyst Austin Moeller said in a note Thursday, citing discussions with Virgin’s executives also on Thursday.

Moeller kept his buy rating on Virgin Galactic shares and lowered his price target on the stock to $36, from $44, representing an upside of more than 250% over Thursday’s price.

“We remain confident in Virgin Galactic’s business model,” which features a
“promising” addressable market of at least 1.3 million billionaires and “has a spaceship platform which has already demonstrated the capability to transport humans into space,” Moeller said.

“While scaling the spaceship and mothership fleet is expected to be relatively
capital-intensive, the company remains very well capitalized … Much of the work that lies ahead in expanding the fleet is evolutionary, not revolutionary.”

Shares of Virgin have lost 63% in the past 12 months, contrasting with gains of around 23% for the S&P 500 index.
SPX,
-0.43%

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