Bold blue banners, an ebullient billionaire and actual fireworks ushered in the landing of Virgin Galactic on the New York Stock Exchange last week — but the stock’s performance since then has fizzled.
Galactic has lost 21% of its value since it started trading on October 28 and Monday’s market close, sinking from $11.79 to $9.35 per share.
It was yet another disappointing IPO for a stock market that’s had plenty of clunkers this year. But Galactic’s stock market debut was disappointing for more than a few reasons.
First, all that really happened last Monday was a ticker swap: IPOA was replaced with SPCE, something investors had known about for months.
IPOA was the symbol for Social Capital Hedosophia, the company created by venture capitalist Chamath Palihapitiya, as a “blank check” investing tool that pooled money while it searched for a takeover target. It began trading in 2017 at $10 a share.
Galactic announced in July that it would be that takeover target. British serial entrepreneur Richard Branson, Galactic’s founder, kept a majority stake in the combined company.
Because the deal was executed as a reverse merger, Galactic was not required to make many of the financial disclosures required of more traditional IPOs.
Chad Anderson, the CEO of Space Angels, a private equity firm that invests in space companies, called it an “IPO Lite.” The lack of detailed financial data could be another reason Galactic’s stock hasn’t taken off, Anderson told CNN Business.
“It’s going to be really difficult to get institutional investors with the big money interested in a company if they don’t have access to all the information they’re used to seeing,” Anderson said.
WeWork and the IPO market
From a space enthusiast’s vantage point, however, Galactic’s stock market debut was potentially more exciting. It’s the first private space tourism company to go public, and the first among a crop of “new space” companies to take the plunge.
But Galactic’s trading debut came just as Wall Street is growing increasingly wary of tech companies without a proven business plan. Other companies with disappointing IPOs this year include Uber, Lyft and Slack.
And then there is WeWork, which was poised to be one of the most high-profile debuts of the year until became one of the most high-profile IPO debacles when it pulled its plans to go public in September. The company faced intense scrutiny for its corporate governance structure, steep losses and an inflated private market valuation.
Some analysts have questioned how big the demand might be demand for commercial space tourism, and whether enough ultra-wealthy customers can be persuaded to take such flights. Galactic has charged its current book of about 600 customers $200,000 to $250,000 apiece for 90-minute rides that peak in altitude 50 miles up, giving passengers about five minutes of weightlessness.
Galactic says there’s enough interest to support one or more tourism businesses, and it has a long list of people who want tickets the next time they go on sale.
Anderson, the Space Angels CEO, said the venture capital markets — and he personally — aren’t all that enthusiastic about the suborbital space tourism market.
But, Anderson added, Galactic’s stock performance shouldn’t be considered a barometer for the overall commercial space industry, which is booming in recent years as entrepreneurs take on ventures from satellite software to small rocket launch businesses. And Galactic’s IPO could eventually be a boon for the overall industry, he said.
“With Virgin Galactic going public, a piece of the market is much more accessible. That lowers the cost of participation, and the more participation there is [in space investing], the more engagement, and then more excitement there’ll be for the broader market.” Anderson said.
Whether Galactic can run a profitable business remains to be seen. The company has conducted two successful test flights to the edge of space, but commercial operations aren’t slated to begin until next year.