MW Why Virgin Galactic's stock is having its worst day ever, after a record-smashing 7-day run
By William Gavin
The space-tourism company made a move to pay off some debt, but investors aren't happy that it will issue new shares to do so
Virgin Galactic last flew one of its vehicles in June 2024. The company plans to return to flight in the fourth quarter of 2026.
Virgin Galactic's stock was taking a historic dive on Tuesday after the space-tourism firm disclosed new details about how it plans to shore up its finances.
The selloff comes after shares of the company $(SPCE)$, founded by billionaire Richard Branson, had rocketed to a record-breaking seven-day rally of 204.5% through Monday, partially thanks to industrywide interest fueled by the upcoming SpaceX $(SPCX)$ initial public offering. Its previous record for a seven-day gain, not including the recent period, was when it shot up 97.3% over the seven-session stretch ending Feb. 19, 2020.
The company filed on Tuesday a notice of redemption for up to $30.5 million of its 9.80% "first lien notes," due at the end of 2028. Virgin Galactic is taking advantage of the recent big rally in its stock, saying it will be issuing shares of common stock to the holders of the notes.
Current shareholders tend to dislike when new shares are issued. It's dilutive, as an increase in the number of shares outstanding means the percentage of the company current shareholders own is reduced. And $30.5 million worth of stock would represent about 6.5% of the company's current market capitalization of $467.7 million.
Virgin's stock plunged 38.3% in recent midday trading. That puts it on track to break its current record for a one-day loss of 23.6%, set on Feb. 27, 2020, according to Dow Jones Market Data.
Despite the investor reaction, there is a bright side to the announcement. If Virgin Galactic can make the full redemption, it won't have to make principal payments on the notes until March 31, 2028, according to the filing.
The amount of notes redeemed and the number of shares issued depend on how the stock performs over a five-day observation period, Virgin said. It also has the option to not redeem the notes if the stock falls below a set floor price. That means that the amount it redeems on June 10 may be less than $30.52 million.
What had also helped set the stage for the stock's rally, and the subsequent stock offering, was that investor Rich Huang and his firm, RichRich Capital, had recently disclosed stakes in the company. Huang has a 5.26% stake in Virgin, while RichRich has a 4.62% stake, as of Friday.
Virgin also settled litigation against the company last week, while SpaceX's IPO plans are also driving interest.
"Space is a big idea [that] has been and is getting a lot of momentum," Virgin CEO Michael Colglazier said on a May earnings call, according to a transcript. "So a lot of good things coming as SpaceX continues to mature and goes forward. And I think we will benefit from that."
Colglazier last week touted Virgin's work to pay off its debt and to cut spending. The company reported revenue of $200,000 last quarter, down from $500,000 a year earlier, against a net loss of $65 million, a 22% improvement. It had $251 million in cash, cash equivalents and securities as of March 31.
Virgin launched its seventh and last commercial flight in June 2024 and has since been working on developing its new spacecraft, called SpaceShip. The company said it is on track to launch its first flight with the vehicle in the fourth quarter of 2026. Each is designed to fly twice a week and carry out more than 500 missions over its lifetime, Virgin said.
Virgin's plan to redeem principal on its notes "strategically aligns" with its plans to ramp up space tourism flights, according to the company. It expects to fly four flights per month in January 2027 and reach eight per month by the second quarter of next year, according to CFO Douglas Ahrens.
-William Gavin
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June 02, 2026 13:53 ET (17:53 GMT)
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