Shares of space tourism company Virgin Galactic (SPCE 4.25%) fell as much as 7.8% in trading on Wednesday as the market's downturn hit high-volatility companies hard. There wasn't major news out about the company today, but that doesn't mean the falling stock price itself isn't a bad sign for the company's survival.
At 2:30 p.m. ET, shares were down 5.2%, and Virgin Galactic is near hitting an all-time low close today.
NYSE: SPCE
Key Data Points
Virgin Galactic's money problems
For some companies, a falling stock price is a problem in and of itself. That's the case for Virgin Galactic because the company is burning about $600 million per year in operations, generating only about $10 million to $15 million per year in revenue from the current spaceship, and has only $980 million in cash as of the end of the second quarter.
To make it to the point where Virgin Galactic is a going concern, the company needs to build what it dubs the "delta class" spacecraft, which costs $50 million to $60 million apiece. They're also unproven, and the first one hasn't even been built and gone into testing.
This creates a financial hole the company can fill with funding from debt or stock sales, but as the stock falls, it's harder and harder to raise debt or sell stock.
A green shoot for Virgin Galactic
While finances are a challenge, it's not all bad news for the company. My colleague Rich Smith highlighted yesterday that upcoming astronaut Alan Stern could help the company obtain future NASA funding for astronaut training.
Third-quarter earnings should be released in early November, and that's when we'll learn more about the balance sheet, cash burn, and potential funding for the future. If nothing changes and Virgin Galactic just keeps burning cash, the stock will continue to fall. But if funding is ultimately secured from NASA or someone else, this could be a great comeback stock.
