When noted short-seller Jim Chanos of Kynikos Associates told investors at the Grant's Interest Rate Observer conference yesterday that he loved space stocks, and would "go long" any publicly traded space company, the news helped to drive Virgin Galactic (SPCE -2.30%) stock up as much as 7%. But then, Chanos clarified that he was just joking about space stocks ...
And now, Virgin Galactic shares are headed the other way: down a depressing 8% in Wednesday trading circa 12:05 p.m. EDT.
Why such dramatic reactions to what is, after all, just one fellow's opinion -- and the opinion of a pretty pessimistic person to boot? I'm honestly not sure. Possibly, investors are getting the sense that they've been duped, tricked, had the rug pulled out from under them.
Lol what a rug pull!— Cade Cunningham (@cadecunninghamc) October 20, 2020
Maybe this is why Virgin Galactic stock not only gave up almost all of the gains it scored early yesterday by the close of trading yesterday -- but why it's falling even farther today.
But maybe, just maybe, Virgin Galactic itself bears part of the blame here.
After all, it wouldn't matter so much what a trader like Chanos says about Virgin Galactic -- whether he likes it or doesn't -- if the company itself was raking in revenue and earning profits from its business sending tourists to space. There'd be solid numbers to hang a valuation on, and investors could decide for themselves if Virgin Galactic was earning to justify its stock price.
Instead, the company has mainly produced promises to date -- promises it would begin commercial operations this year and turn profitable next year. Until Virgin Galactic begins fulfilling those promises, you should expect its shares to remain vulnerable to the words of the Wall Street wise.