What happened

Shares of Virgin Galactic Holdings (NYSE:SPCE) traded down more than 3% as of noon EDT on Thursday. They had been down more than 5% earlier in the day, after the company priced its secondary stock offering. The offering adds more shares to the float and was priced at a discount to Wednesday's closing price, which often puts pressure on existing shares.

So what

It's been a rough week for Virgin Galactic shareholders. The space tourism company on Aug. 3 announced a worse-than-expected quarterly loss and said it generated no revenue during the three-month period. The company also plans to sell at least 23.6 million shares of common stock to boost its working capital.

Virgin Galactic Unity spacecraft with transport plane

Image source: Virgin Galactic.

The loss was expected, as Virgin Galactic is not yet flying commercial flights. But the company also delayed the start of commercial service until 2021, meaning it will miss its previously stated goal to fly founder Richard Branson into space this year.

The stock sale is the real pressure point on the shares. They will add considerably to Virgin Galactic's 100 million share float, providing more supply of stock at a time when demand is under question due to the delays. After markets closed Wednesday, Virgin Galactic priced the offering at $19.50 per share, a discount to Wednesday's closing price of $20.15.

Now what

Secondary offerings are typically priced at a discount to the trading price, and a stock normally falls following the secondary due to all the reasons mentioned above. Given Virgin Galactic is pre-revenue, investors are not judging it on per-share metrics, the larger denominator shouldn't really change the bull case, and the secondary isn't a reason for investors to panic.

It also will provide the company with at least $460 million in gross proceeds, which is valuable for a business that is not yet bringing in any cash.

Alas, it's also a reminder that the bull case is based a lot more on hope and potential than it is on fundamentals. There's a lot that can go wrong for Virgin Galactic in its quest to turn into a viable growth stock. Given the risks, investors interested in buying in should limit this stock to a small part of a diversified portfolio.