What happened

Shares of Virgin Galactic (NYSE:SPCE) traded down more than 9% on Tuesday after the holding company controlled by Richard Branson filed to sell additional shares in the space tourism company. Virgin Galactic got a boost on Monday after rival SpaceX successfully launched two astronauts into space, but investors were back to being focused on Virgin Galactic's prospects on Tuesday.

So what

Virgin Galactic has been a volatile stock since hitting public markets last year, in part because the stock trades more on speculation about its future prospects instead of on fundamentals. The company generated only $238,000 in revenue in the first quarter, but boasts more than 1,000 deposits by people who have indicated a willingness to pay $250,000 apiece for a brief flight to space.

A rocket launching into space.

Image source: Getty Images.

The company hopes to begin service this year, at which point investors will get a better idea how to accurately value the business, but for now the stock tends to move based on space developments and what is going on at the company.

In a regulatory filing Tuesday, Richard Branson's Vieco 10 holding company said it may sell up to 12.5 million shares. Branson's Virgin Group is the majority owner of Vieco 10, and the holding company owns a majority of Virgin Galactic shares.

Last month, Branson sold a chunk of his stake in Virgin Galactic to raise money to support other Virgin businesses, including Virgin Atlantic Airways. With airlines around the globe in distress due to the COVID-19 pandemic, the latest sale is presumably also tied to helping Virgin Atlantic or other companies, but no matter what the reason investors never like to see insiders selling out.

Now what

Even if Vieco sells the 12.5 million shares it would still own about 77 million shares of Virgin Galactic, so it isn't heading for the exits. But Branson has a sprawling corporate empire and can raise cash in numerous ways, and obviously sees selling Virgin Galactic shares as among his best options. For investors grappling with how to value the space tourism company, that should be significant.

I don't know how to value Virgin Galactic either, but I remain skeptical the company will end up a sustainable business and not just a billionaire's vanity project. I could be wrong, but seeing Branson liquidate part of his stake before Virgin Galactic even launches its first person into space is not a point in favor of the bull argument for the stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.