Despite 2021 being a record-setting year for initial public offerings, most IPOs didn’t perform that well after all. Investors have been piling money into companies planning to go public, but almost two-thirds of them are now trading at prices lower than when they first debuted on the market. One exception to this is SPACs, special purpose acquisition companies, which have fared a bit better than the regular IPO. One particular SPAC made news on Thursday, Virgin Orbit (VORB), which is a spin-off of Virgin Galactic’s (NYSE: SPCE) existing satellite business.
Virgin Galactic markets itself as more of a space tourism company for the most part. However, like most space stocks, the main business appeal for space technology right now is to launch satellites into space. That’s one reason why Virgin decided to spin off its highly attractive satellite business through a SPAC, previously known as NextGen Acquisition Corp. The deal is expected to conclude by the end of the month before the new year.
“I’m thrilled to support Virgin Orbit as it becomes a publicly traded business and builds on the incredible successes that we’ve seen this year,” said Richard Branson, founder of Virgin Orbit, in a statement.
However, despite the excitement previously seen in most space stocks, Virgin Orbit seems to be struggling to gain traction. The company said that it plans to raise around $288 million in proceeds and an extra $68 million in SPAC proceeds. In total, that’s a lot less than originally expected. The company estimated earlier this year that it would need $420 million in cash to fund itself until 2024. The means the remainder is going to need to come from somewhere else.
That’s far from good news for the company. Whether that’s because most investors are a bit exhausted from this year’s IPOs or that it’s just the Christmas season and the timing is off. Regardless, the main question for Virgin Orbit is how quickly it will be able to become cash-flow neutral.
Satellite stocks have been coming under fire in reason weeks as investors reevaluate the fundamentals behind many of these businesses. A recent short-seller report targeted Astra Space (NASDAQ: ASTR), with analysts claiming the company will never have a realistic chance of being profitable. Many other satellite stocks could face a similar fate in the years to come.
Shares of Virgin Galactic were up 6.1% in anticipation of Virgin Orbit. Since the year began, Virgin has fallen by more than 40.4%. Despite being one of the largest publicly-traded space stocks, investors seem to be losing favor in Virgin, compared to Musk’s SpaceX and Bezos’ Blue Origins, both of which are still private companies for now.
Virgin Galactic Company Profile
Virgin Galactic Holdings Inc is a United States-based vertically-integrated aerospace company pioneering human spaceflight for private individuals & researchers, and it also manufactures advanced air and space vehicles. Using its technologies, it is developing a spaceflight system designed to offer its customers a unique, multi-day, and transformative experience. This culminates in a spaceflight that includes views of Earth from space and several minutes of weightlessness that will launch from Spaceport America, New Mexico. – Warrior Trading News