virgin galactic stock

Virgin Galactic stock is trading higher in US pre-market price action today after the company announced a deal with Aurora Flight Sciences, a subsidiary of Boeing. The two companies would partner to design and manufacture Virgin’s next-generation mothership.

The aircraft would be manufactured at Aurora’s Columbus, Mississippi, and Bridgeport, West Virginia facilities. However, the final assembly would be done at Virgin Galactic’s facility in Mojave, California.

Commenting on the deal, Michael Colglazier, Virgin Galactic’s CEO, said, “Our next generation motherships are integral to scaling our operations. They will be faster to produce, easier to maintain and will allow us to fly substantially more missions each year. Supported by the scale and strength of Boeing, Aurora is the ideal manufacturing partner for us as we build our fleet to support 400 flights per year at Spaceport America.”

Virgin Galactic was founded by billionaire Sir Richard Branson. The company went public in late 2019 through a reverse merger with one of Chamath Palihapitiya’s SPAC. Virgin was incidentally the first company to go public with a Palihapitiya SPAC, who went on to earn the title of “King of SPACs.”

Between 2020 and 2021, SPACs backed by Palihapitiya took Opendoor, SoFi, and Clover Health also public. However, amid the sell-off in newly listed stocks, all these stocks trade below the SPAC IPO price of $10. Clover Health, which was accused of fraud by short-seller Hindenburg Research, is the worst-performing of the lot and trades at a discount of over 75% from the SPAC IPO price.

Recently, a short-seller report accused NIO of accounting fraud. The company has rejected the findings as baseless. In the past, Hindenburg accused Nikola and Lordstown Motors of wrongdoings. Senior executives at both these companies resigned shortly after the report.

Virgin Galactic Stock Rises after Boeing Deal

Meanwhile, the deal with the Boeing subsidiary is a welcome break for investors. The stock has been in freefall after it peaked last year ahead of its maiden test flight. The company announced a stock offering which added to the sell-off. Subsequently, the US Federal Aviation Admiration investigated the company’s flight over reports of a mishap.

The FAA later cleared the company and allowed it to resume commercial operations. However, over the last few months, there has been a sell-off in growth names and Virgin Galactic stock has lost over half of its market cap this year.

Supply Chain Issues

The company has also delayed the launch of commercial operations to the first quarter of 2023. It cited supply chain and labor shortage for the delay. The company reported 800 future reservations during its first-quarter earnings call. It is currently in the pre-revenue stage and burning a lot of cash. It also raised $425 million earlier this year through a convertible debt offering. At the end of March, it had $1.22 as cash and cash equivalents of $1.22 billion on its balance sheet.

Virgin Galactic has been out of favor with markets amid the sell-off in speculative names. Last year, the stock surged after it joined ranks with meme stocks. Most meme stocks have crashed in 2022 even as some of the fundamentally strong names on WallStreetBets have held up strong despite the crash in tech stocks.

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