Shares of Virgin Galactic (SPCE 4.69%) stock are down 3% in late morning trading Tuesday, at 11:45 a.m EDT.
There's no particular news of note driving the stock lower today, but there may be a residue of worry holding over from a report that The Wall Street Journal put out over the weekend, warning of short sellers' rising interest in shorting stocks of special purpose acquisition vehicles, and the stocks they have sponsored in IPOs -- stocks like Virgin Galactic.
"Short sellers are coming for SPACs," warns the Journal, noting that "the dollar value of bearish bets against shares of SPACs has more than tripled to about $2.7 billion [since] the start of the year."
And shorts aren't just attacking SPACs per se -- blank check companies that have been formed for the purpose of finding a private company, buying it, and conducting a reverse merger to bring it public. They're also "wagering against companies after they combine with SPACs."
Indeed, as the paper points out, "postmerger companies" such as Virgin Galactic, which came public via SPAC in late 2019, "are particularly attractive to short because they have larger market capitalizations, making their shares easier to borrow, and because early investors in the SPACs are eager to sell shares to lock in profits."
That could make Virgin Galactic a particularly tempting target for a short attack. Valued in excess of $8 billion today, but with no profits and almost no revenue, Virgin Galactic already looks overvalued by traditional metrics, giving the stock a lot of room to fall. Worse, Virgin Galactic recently announced that it will postpone test flight operations on its spaceplanes until May, essentially guaranteeing short sellers that the company will report no revenue before then -- and possibly no revenue through the end of this year.
With some skeptics now predicting that Virgin Galactic won't be able to start up commercial operations before 2022, Virgin Galactic shares could remain in short-sellers' crosshairs for a long time to come.