Virgin Galactic soars on space tourism hype while Orbit struggles

Virgin’s two space ventures seem to be flying in opposite directions, with Virgin Galactic soaring higher on successful test flights, while Virgin Orbit is running on its third cash injection in three months, and the cause of its UK rocket launch failure is traced to a trivial malfunction – a dislodged fuel filter. But as Galactic gets ready to launch commercial space flights this spring, a Galactic shareholder is suing, claiming that founder Richard Branson lied about the safety of the spacecraft to manipulate the company’s stock movement. Will Virgin fight or flight?

- Virgin Galactic’s share price surged 14.67% on 15 February after successful test flights brought it closer to its commercial space tourism launch set for Q2 2023.

-Virgin Orbit’s UK launch failure was traced down to a dislodged fuel filter, and the company has been experiencing cash flow problems since late 2022.

- A shareholder is suing Virgin Galactic executives and Richard Branson, accusing them of having lied about the safety of the spacecraft to manipulate the stock market.

Galactic takes off

Shares of Virgin Galactic [SPCE], Richard Branson’s commercial space tourism company, surged 14.67% on its successful test flight on 15 February.

The aircraft, nicknamed VMS Eve, took off from the Mojave Air and Space Port in California, US, and lasted over 2.5 hours, reaching a maximum altitude of around 41,500 feet (12,650 meters), SpaceNews reported, citing flight tracking data. It was the carrier plane’s first flight since October 2021.

After some more testing rounds, the company will be ready to send out crewed spaceflights, Kelly Latimer, Virgin Galactic's senior flight test director, said on 15 February.

In January, Galactic affirmed that it is on track to launch commercial flights sometime in the second quarter of 2023.

Fight or flight?

After the promising test flights, Wolfe Research upgraded its rating for Virgin Galactic from “underperform” to “peer perform”. Wolfe analyst Myles Walton said the latest successful flight is “the clearest sign that an event path of milestones toward commercial service could be forming in the next 3 to 5 months that would dominate the stock”.

However, the analyst remains concerned about the spaceflight company’s negative free cash flow and noted that the flight was about a month behind schedule according to the timeframe provided in November.

On top of these concerns, Virgin Galactic shareholder Yousef Abughazaleh sued the company, alleging its executives and founder Richard Branson lied about the safety of the spacecraft to manipulate Galactic’s share price, allowing executives to cash out over $1.3bn worth of common stock. The company and its executives worked together to “misrepresent and conceal significant mishaps and setbacks during test flights,” according to the lawsuit filing.

Is Orbit going in circles?

Meanwhile, Richard Branson’s other space venture, Virgin Orbit [VORB], runs on lifelines.

The satellite launch company, which went public in 2021, has been experiencing cash flow trouble since late last year. Virgin Investments, a subsidiary of the Virgin Group, injected about $55m into Virgin Orbit in the last few months.

After a failed UK launch mission in January which Optoreported on earlier, an investigation revealed a trivial reason – a “$100-part” in the LauncherOne rocket, according to Virgin Orbit CEO Dan Hart. The cause appears to be a dislodged fuel filter, the company said in a statement issued on 14 February.

Hart said the investigation is still ongoing as they continue to rule out other potential interferences. In addition, Hart revealed that Virgin Orbit engineers are modifying their next rocket with a more robust filter, adding that the company “will proceed cautiously toward the launch of our next rocket, which is well into the integration and test process.”

The next launch will be for a commercial customer, the statement added.

Funds in focus

Several ETFs provide exposure to innovators in the space industry.

Virgin Galactic is the third largest holding in the SPDR S&P Kensho Final Frontiers ETF [ROKT], with a 4.38% weighting, succeeded by the top holding Maxar Technologies [MAXR], which has a 6.20% weighting and Iridium Communications [IRDM], with a 4.38% weighting. The ETF is up 2.07% in the last month and up 15.41% in the last year.

Ark Invest’s ARK Space Exploration & Innovation ETF [ARKX] includes Trimble [TRMB], Iridium Communications [IRDM] and Kratos Defense and Security [KTOS] as its top three holdings. The fund is up 2.36% in the last month and up 12.47% year-to-date.