What happened
Chamath Palihapitiya is leaving the board of Virgin Galactic Holdings (SPCE +1.68%), causing some investors to head for the exit as well. Shares of the space tourism company traded down as much as 5% on Friday morning after the well-known investor announced he will no longer chair its board.
So what
Palihapitiya has been with Virgin Galactic since the beginning of its public life. His Social Capital Hedosophia Holdings sponsored the special purpose acquisition company (SPAC) that took Virgin Galactic public in October 2019, and Palihapitiya until now had served as chairman of the company's board as well as owning a significant stake.
A Virgin Galactic space plane. Image source: Virgin Galactic.
The investor sold his personal holdings in Virgin Galactic last year, though he still owns shares through Social Capital. On Friday, Virgin Galactic announced Palihapitiya will step down as a director "to focus on other public-company board commitments."
Evan Lovell, a current director who is also the chief investment officer of Richard Branson's Virgin Group, will step in as interim chairman while the company conducts a search for new directors.
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Now what
To some extent, this news should have been expected. Palihapitiya focuses most of his attention on young and emerging companies, and he has a lot of different interests to juggle. His stock sale last year was designed to raise capital for other projects, and it makes sense that he wants to devote more time and attention to these projects as well.
But investors would be justified in having a bit of a bitter taste in their mouths after swallowing this news. Palihapitiya in years past had been one of the most outspoken bulls when it came to Virgin Galactic, and he leaves with the outcome of the project very much still in doubt.
Virgin Galactic shares today trade below where the company went public at more than two years ago, and with the start of space tourism flights delayed until at least the end of this year, there are still months of uncertainty ahead.
Virgin Galactic remains a speculative investment best limited to a small part of a well-diversified portfolio. If the company can iron out its issues and commence service in the months to come, those who bought in could still be well rewarded for their patience. But given the risk, they can't be blamed if they decide, like Palihapitiya, to focus attention elsewhere.
