In a statement May 11, the company announced that Vieco 10, the Virgin Group holding company that owns the majority of Virgin Galactic, planned to sell up to 25 million shares, accounting for about 22% of its overall stake in the company. That sale would generate $485 million for Virgin at the price of $19.40 per share at the close of trading May 11.
Virgin Group said the sale of stock, the company said in a statement and in its S-1 filing with the U.S. Securities and Exchange Commission (SEC), was “to support its portfolio of global leisure, holiday and travel businesses that have been affected by the unprecedented impact of COVID-19.”
That collection of companies, which includes airlines, cruise lines and hotels, has been devastated by the coronavirus pandemic that has brought travel and tourism nearly to a halt worldwide. Virgin Australia, an Australian airline, went into a form of bankruptcy protection called voluntary administration in April.
Virgin Atlantic, the airline that is one of the cornerstones of the Virgin Group, is also in financial distress and has failed so far to obtain a bailout from the British government, raising questions about its future.
More than two months ago, Branson warned about the about effect of the pandemic on the company. “All our businesses are on the front line of the virus,” he said a March 9 event at the British Embassy here, where the Royal Aeronautical Society gave him its Transatlantic Leading Edge Award. “I would beg people not to stop flying, because the whole airline industry would come to a grinding halt very quickly.”
Virgin Galactic executives, speaking on an earnings call with analysts May 5 to discuss the company’s first quarter financial results, gave no indication that a sale of part of Virgin Group’s stake in the company was imminent. The company had filed an S-1 registration statement with the SEC May 1, but Jon Campagna, chief financial officer of Virgin Galactic, said that was primarily a technicality, a condition of the merger with Social Capital Hedosophia last year “to register the resale of the shares of a handful of our shareholders.”
The revised S-1 filing to sell some of Virgin Group’s shares caused the stock to drop significant in early trading on the New York Stock Exchange May 11 but partially recovered, closing down nearly 4%.
The company’s shares soared early this year, reaching more than $40 a share in February before falling, like much of the stock market, as the pandemic wreaked havoc on the economy. Shares fell to nearly $10 a share by mid-March before slowing rising back to nearly $20.
Virgin Galactic, in its May 5 earnings announcement, cautioned that it did not expect to generate significant revenue this year as it completes the flight test program for its SpaceShipTwo suborbital spaceplane. Company executives said their goal is to fly Branson to space on the vehicle “as soon as we can,” but unlike the company’s previous earnings call in February, did not commit to flying him this year.