Yahoo Finance Virgin Galactic stock soars as company announces job cuts, spacecraft shift
Virgin Galactic (SPCE) stock skyrocketed almost 20% to settle at $1.86 per share on Thursday after the commercial space travel company announced it would cut 18% of its workforce and shift focus to a new spacecraft expected to be more profitable.
Virgin Galactic completed six spaceflights in under half a year with its initial Unity spaceship but expects to pause those flights in mid-2024 as it shifts to its new Delta vehicle. Virgin Galactic also said it will lay off about 185 workers.
“The big move we're making here is pivoting the resources that have been being put into the Unity flights and redirecting them over to get the Delta Ships done with the cash we have on hand,” Michael Colglazier, CEO of Virgin Galactic, told analysts during the company's third quarter earnings call.
Delta will be able to transport 50% more passengers than Unity, twice a week. The spacecraft is expected to allow the company to achieve positive cash flow by 2026.
The company also said it now anticipates revenue of $3 million for the fourth quarter versus analyst estimates for $1.58 million.
A higher interest rate environment is prompting capital intensive space-related companies to lower costs and devise ways to survive for what could be turbulent times ahead.
On Thursday the founders of rocket launch services startup Astra Space (ASTR) offered to take the company private.
The startup went public via a SPAC in 2021 and the stock reached $185 per share. Shares now sit above $1 each as the company struggles to secure more funding for its operations.
“We’re at a perilous time for space startups because for a long time, with low interest rates, they have been living with basically free money,” Eric Berger, senior space editor at Ars Technica, told Yahoo Finance Live earlier this year.
In April, satellite launch startup Virgin Orbit filed for Chapter 11 after failing to secure funding.
“A lot of these companies, Virgin Orbit included, were still pretty far away from delivering profits, or certainly positive cash flow,” said Berger.
On Wednesday afternoon Virgin Galactic’s CEO sounded optimistic that some of its largest expenses, such as engineering and factory infrastructure, are in the rear view mirror.
He said that "the need for cash on hand is less than you may have seen from us in the past."
Thursday's stock movement on Virgin Galactic may be attributed to a short squeeze. Short interest on the stock sits above 22% of the float, a relatively high level. Year-to-date shares are down more than 40%.
Ines is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
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