Why Virgin Galactic Stock Is Crashing Down To Earth Premarket Today

Shares of Richard Branson-owned space tourism company Virgin Galactic Holdings, Inc. SPCE fell sharply in premarket trading on Friday.

The company filed with the SEC a prospectus for an at-the-market common stock offering, which will allow it to sell $400 million worth of shares over time. It expects to use the proceeds for the development of its spaceship fleet and infrastructure to scale its commercial operations and for general corporate purposes.

The company also said it has completed its previous $300 million worth at-the-market offering.

KeyBanc Capital Markets analyst Michael Leshock said the new $400 million offering would be 20-25% dilutive to shares. This explained the sell-off in Thursday’s after-hours session, he said. The analyst, however, sees the offering as good from the timing perspective, given the recent strength in the stock.

The stock has picked up some strength recently after it confirmed its commercial flight schedule. The first commercial spaceflight ‘Galactic 01’ is planned to fly between June 27-30. The second commercial spaceflight ‘Galactic 02’ will follow in early August, with monthly spaceflights expected thereafter, the company said last week.

The analyst reiterated his view that Virgin Galactic will need to raise $500 million to $1 billion in additional capital before reaching positive free cash flow and ramping up its Delta class spaceships, targeted for 2026. So after the current offering, the company might need an incremental $100 million to $600 million to fund its growth.

In premarket trading on Friday, Virgin Galactic plunged 17.85% to $4.37, according to Benzinga Pro data.

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