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Why Virgin Galactic Stock Popped 6% This Morning

By Rich Smith – Aug 26, 2020 at 2:34PM

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Virgin Atlantic may be saved -- and that may be good news for Virgin Galactic.

What happened

Shares of space tourism pioneer Virgin Galactic (SPCE -4.10%) jumped nearly 6% in early trading in the NYSE today before beginning to retrace as the morning wore on. As of noon EDT, the stock remained up 2.2%. But why did Virgin Galactic go up in the first place?

I have a theory.

Virgin Atlantic flight crew wearing PPE next to a Virgin Atlantic airplane.

Image source: Virgin Atlantic.

So what

Yesterday, Bloomberg reported that Sir Richard Branson, who founded both Virgin Galactic and its even more famous cousin Virgin Atlantic, has "cleared a crucial obstacle on the tortuous journey to rescue [that] flagship airline." On Tuesday, creditors agreed to back a $1.6 billion bailout plan that is going before a British court for approval next week.  

While COVID-19 and the antipathy it has created for air travel remain problematic for the airline, there's at least a chance now that Virgin Atlantic will get access to the funding it needs to survive both the pandemic and the recession.

Now what

And if that is true, then it may mean Branson will not need to liquidate any more of his stake in Virgin Galactic than he already has in order to raise cash to save his favorite airline. Such forced stock sales logically would have put further downward pressure on Virgin Galactic's share price. Accordingly, the absence of such sales may be taken as good news for Virgin Galactic stock.

In the absence of any better good news (a successful commercial flight for example, some revenues, maybe even some earnings...), this news will have to do.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Virgin Galactic Holdings Inc. The Motley Fool has a disclosure policy.

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