Virgin Galactic Plunges After New Glitch Clouds Timeline

(Bloomberg) -- Virgin Galactic Holdings Inc. tumbled after the space-tourism startup said it encountered another technical problem that could force a second postponement of a planned test flight.

Repairs have been largely completed for a glitch on its spacecraft, but unrelated issues were discovered on the plane that carries the vehicle aloft, the company founded by billionaire Richard Branson said as it reported financial results.

Unspecified “fatigue and stress” on the airframe of the four-engine carrier plane VMS Eve was determined after a May 4 flight, Mike Moses, the company’s president of human spaceflight, said on a conference call Monday evening.

In February, Virgin Galactic said an electromagnetic interference-related issue on its VSS Unity spacecraft would be resolved in nine weeks or less, and that it would be ready for a space flight by May -- three months after an initial target. Fixes for that problem, which was traced to upgraded flight-control computers, are about 90% completed, Chief Executive Officer Michael Colglazier said on the call.

The shares pared a drop of as much as 21% to trade down 8.6% to $16.40 -- an almost eight-month low -- as of 9:45 a.m. in New York on Tuesday. Virgin Galactic had dropped 24% this year through Monday.

“The path to commercial scale is being bounded by ‘space is hard’ type of realities,” Adam Jonas, an analyst at Morgan Stanley, said in a note to clients. While still seeing “tremendous potential” for Virgin Galactic, Jonas said technical problems could delay the timing for generating revenue more than year. He maintained an equal-weight rating and $30 price target for the stock.

Virgin Galactic said it would update investors next week about its plans for the airplane, which carries the VSS Unity to an altitude of about 45,000 feet before releasing the spacecraft. Eve dates to 2008 and has performed 293 flights.

The news about the potential maintenance problem clouds the timing of its next launch and a subsequent crewed test flight.

Fatal Crash

The company still aims to fly Branson this summer, and resume ticket sales after doing so. The company suspended sales after a 2014 crash killed a test pilot. It already has a roster of 600 ticket holders who have paid as much as $250,000 each for a suborbital flight, but said it will offer only “a finite number” of new tickets once sales restart.

Virgin Galactic also plans to fly two members of the Italian Air Force this fall in its first official revenue-producing flight. It is charging $500,000 for seats on that micro gravity experience and $600,000 for later research and training flights. It has not announced prices for its private space tourism flights but has said it will cost more than the prior $250,000 price per seat.

The company reported a net loss of $129.7 million in the quarter, compared with a $377 million loss in the same period of 2020. Sales were zero, down from $238 million in the first quarter last year. It cited the coronavirus pandemic in a statement for “ongoing delays to its business and operations.”

Virgin Galactic restated its 2020 results because of a U.S. accounting change last month related to special purpose acquisition companies, or SPACs. The company combined with Social Capital Hedosophia and went public in October 2019.

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