What happened

Shares of billionaire Sir Richard Branson's space tourism company Virgin Galactic Holdings (SPCE -5.19%) soared Friday morning on news that the Federal Aviation Administration (FAA) has approved the company for passenger space flights. As of 10:35 a.m. EDT, Virgin Galactic shares were about 25% higher. 

So what

FAA approval for a full commercial license to operate with passengers follows the company's latest successful test flight in May. Its previous license allowed only test flights with crew (no passengers). Data from the May 22 test flight -- which reached a speed of Mach 3 and an altitude of 55.5 miles -- has been fully analyzed, the company said, and all flight objectives were achieved. Branson is reportedly hoping to beat fellow billionaire Jeff Bezos into space after Bezos announced he will be on the initial human flight of his Blue Origin space company. 

Newest spacecraft from Virgin Galactic -- VSS Imagine.

Virgin Galactic's VSS Imagine. Image source: Virgin Galactic.

Now what

Successful results from the latest test flight included the collection of cabin environment data, good performance from upgraded horizontal stabilizers and flight controls, and pilot runs of research experiments, which the company will commercialize. Virgin Galactic still plans another three test flights, but the FAA license allowing customer flights marks the first time the agency has approved a space company to fly paying passengers. 

Virgin Galactic was one of the first companies to go public through the special purpose acquisition company (SPAC) merger process in 2019. The company recently unveiled the first craft in its next-generation SpaceShip III fleet. The VSS Imagine will be followed by the next ship in the new series -- the VSS Inspire

Today's stock reaction is also likely being exacerbated due to the high short interest in the company. More than 20% of the public float was being held by short-sellers as of June 15, 2021, according to data from CBS MarketWatch.