What happened

Virgin Galactic Holdings (SPCE 3.15%) stock plummeted 19.5% through noon ET Friday after the space tourism provider announced plans to sell as much as $400 million in new stock -- and noted it had already sold $300 million more in stock over the past 10 months.

So what

In a filing with the SEC, Virgin Galactic revealed that, pursuant to a "distribution agency agreement" signed in August 2022, the space company had sold 22 million shares (worth $135.4 million) through the end of March 2023 (i.e., the end of the last quarter), and a further 37.4 million shares (worth $164.6 million) between the end of March and June 22 -- the date of the filing.

That adds up to $300 million in new stock sold over the last 10 months, and 59.4 million new shares put in circulation. Thus, 21% of all shares currently outstanding were created in just the last 10 months -- a truly staggering amount of stock dilution.

And Virgin Galactic isn't done yet.

Yesterday's same filing confirmed that the company plans to issue a further $400 million worth of stock -- which works out to about 93 million shares at Virgin Galactic's current share price -- "from time to time" in the future.

Now what

Estimating conservatively, this implies that Virgin Galactic might dilute its existing shareholders by a further 22.5% through the new stock offering.

Why is Virgin Galactic selling so many shares? Basically, because Virgin Galactic needs cash. A lot of cash.

Although Virgin Galactic intends to start launching revenue-generating commercial space tourism flights as early as next week, the revenue generated by these flights will be far too little to pay the company's operating costs. In order to generate more revenue, the company will need to build more spaceplanes than the one it currently has in service. Problem is, building those additional spaceplanes will cost money -- as much as $50 million to $60 million apiece.

This then is why Virgin Galactic is selling -- indeed, already has sold -- so many new shares: to generate the cash needed to build out its space tourism fleet. It's a necessary move for the company, but you can hardly blame investors for being a bit upset at the cost.