Well, it seems I was too optimistic.
Write down Virgo Galactic‘S (NYSE: SPCE) Last week I announced a 1-for-20 reverse stock split that by gluing together 20 common shares into a kind of “mega stock,” the company would transform its apparent stock price from $0.74 (Thursday) to a new share price of $0.74 (Thursday). $14.80 (today).
Instead, Virgin Galactic’s stock price has fallen, and as of 11:50 a.m. (ET) Monday, it is down 17.2% to $11.34.
You can’t blame it for trying
This was probably inevitable. As I explained last week, and also two months earlier, Virgin Galactic is a company in decline. Its only operational spaceplane, Unity, has been retired, and the company cannot fly space tourists or generate revenue from space tourism flights until it builds a new Delta spaceplane currently in development. The only ways Virgin Galactic can pay its ongoing operating costs in the coming years are by draining its cash reserves, taking on debt or selling shares (and diluting its shareholders).
And most likely due to a combination of the above.
Are Virgin Galactic shares worth selling?
None of these are attractive options. None of these will make Virgin Galactic seem like an attractive investment. And this situation won’t change for a few years, if and when Virgin builds its Delta spaceplane and resumes space tourism flights.
Now investors don’t have to lose all heap. The fact that Virgin Galactic’s reverse split has been cleared out and its stock price is well above $1 per share means that it is no longer technically a penny stock and is no longer at immediate risk of being delisted from the New York Stock Exchange to be deleted. Virgin could also defy the odds, manage to find the money to keep itself afloat, and get Delta built in time to save its business.
However, the chance of this happening is small. If I had to guess, I’d say it’s more likely that the stock will continue to fall, and sooner than you might think, Virgin Galactic shares could be at risk of being delisted again.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Why Virgin Galactic’s reverse stock split spiraled out of control was originally published by The Motley Fool
