Please ensure Javascript is enabled for purposes of website accessibility

Why Virgin Galactic Stock Popped Today

By Rich Smith – Aug 23, 2021 at 1:11PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company's satellite-launching twin, Virgin Orbit, is finally going public.

What happened

Shares of Virgin Galactic (SPCE -0.78%) had climbed a modest 2.3% by noon EDT on Monday, but today's big news isn't about Virgin Galactic at all. Instead, it involves its sister company, Virgin Orbit.

Road sign reads IPO AHEAD over a rising stock chart

Image source: Getty Images.

So what

This morning, the special purpose acquisition company (SPAC) NextGen Acquisition II announced that it has signed a definitive agreement to take Virgin Orbit public in a reverse merger IPO that values the company at $3.2 billion.

In this deal, NextGen will bring its $383 million in cash to the table, and run a $100 million private investment in public equity (PIPE) transaction, in which Boeing (BA 2.01%) will participate. This will all result in a newly public Virgin Orbit having $483 million in cash to deploy once it becomes an independent company (with the ticker symbol VORB).  

NextGen Acquisition stock is up about the same as Virgin Galactic today, 2%.

Now what

So is this a case of mistaken identity, with investors seeing news about satellite-launcher Virgin Orbit and assuming it refers to space tourism company Virgin Galactic?

Not necessarily. Still, my guess is that the name Boeing is a big part of why Virgin Galactic is flying higher on Virgin Orbit's news. Investors might be interpreting Boeing's interest in owning a piece of Virgin Orbit as suggesting that it might also take an interest in (or even buy) Virgin Galactic at some point. They may not be wrong about that.

Since its founder flew to space last month, Virgin Galactic has seen its shares lose roughly half their value, making them 50% cheaper to any potential acquirer. The company is bleeding cash, and won't begin collecting revenue in any volume for at least another year, when it finally begins flying passengers to space commercially. Until then, there's plenty of time for the stock to become even cheaper, and for an opportunistic acquirer like Boeing to swoop in.

In short, just because Boeing is buying into Virgin Orbit today, doesn't mean it won't do the same thing with Virgin Galactic tomorrow.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Virgin Galactic Holdings Inc Stock Quote
Virgin Galactic Holdings Inc
SPCE
$5.10 (-0.78%) $0.04
Boeing Stock Quote
Boeing
BA
$178.36 (2.01%) $3.51

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.