Virgin Galactic sinks after announcing reverse stock split

Virgin Galactic (SPCE) shares are falling in pre-market trading — and into Thursday's market open — after announcing plans for a 1-for-20 reverse stock split. Yahoo Finance's Morning Brief team reports on the space tourism company's stock movement as it seeks to bolster its stock price through this reverse split.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Luke Carberry Mogan.

Video Transcript

Virgin Galactic shares sinking after announcing a reverse stock split.

The space tourism company, saying its board has approved a reverse stock split of one for 20 that's effective at 5 p.m. there you're taking a look at shares.

They are down right now by about 12%.

Uh, we should note that this is probably happening in order to make sure that they can keep their stock price above a certain threshold.

That's needed, uh, in order to gets a notice, A warning from the exchange that you trade on as well.

Yeah, they're doing this to, uh, in the hopes of being able to remain listed on the New York Stock Exchange when you take a look at some of that historical data here, stocks typically maintaining that minimum average closing price of at least a dollar a share over 30 days to avoid being delisted.

And take a look at the stock reaction this morning we're off just around 10% I believe, just off a 12%.

Yesterday we actually saw shares sinking on the news.

They were off as much as just over 30% at the lows of the day before pairing those declines so again, lots of uncertainty about what exactly it looks like for the future of this company.

The ability here to navigate what it is expected to be a expensive couple of quarters, to say the least as they move forward.

And then also, just ultimately, how this is going to register with investors as well.

Because I think there's lots of questions just about the timeline for some of their lofty and how realistic those are at this point.

Yeah, you think of some of the launches, the flights.

They just recently completed that commercial flight of the Unity spacecraft.

That was, uh, over the past few days here.

And so you talked about how expensive it is to send things into space.

And of course, the goal is you bring some of these costs down if you do it frequently enough and you have reusable rockets.

And so all of these things considered virgin galactic SpaceX, blue origin, all of these initiatives really targeted at making sure that there is more sustainability, that you're able to bring the costs down as well.

But at least in the early innings of this, it's still going to continue to remain expensive right now.

And that's what investors have really had to wrap their heads around with regard to a name like Virgin Galactic here, Um, and whether or not we're going to see, uh, a large amount of you know, con continued spend have to move forward at this juncture and how that would cut into, uh I mean, it's gonna cut into margins there.

There's no other way to slice it.

Yeah, and this is the size that struggle on for some time this year.

It's off over 60%.

And then you compare that to the rise that we've seen the S and P of just about 13% so clearly a real under performer here.