Shares in the space tourism group Virgin Galactic tumbled on Monday after its founder, Sir Richard Branson, ruled out further funding.
The British billionaire alarmed investors by stating in an interview that the loss-making business has enough cash to operate “on its own”, weeks after it announced job cuts and a pause in commercial flights from next year in an effort to save cash.
Branson’s Virgin Group has sold more than $1bn worth of shares in Virgin Galactic since it went public four years ago. The company now owns about 7.7% of the enterprise through its Virgin Investments arm, making it the second largest shareholder.
Asked if he would consider putting more cash into the business, Branson told the Financial Times: “We don’t have the deepest pockets after Covid, and Virgin Galactic has got $1bn, or nearly. It should, I believe, have sufficient funds to do its job on its own.”
The tycoon’s remarks were published over the weekend. When New York opened for trading on Monday, shares in Virgin Galactic fell sharply. By late morning, they were down 17.5% at $1.94.
Branson, 73, founded Virgin Galactic in 2004 in an attempt to make commercial space travel a reality. The company’s stock soared after landing on the New York Stock Exchange in 2019, but has since fallen back to Earth as investors reassessed its prospects. Branson was onboard a test flight that flew to the edge of space two years ago.
But Virgin Galactic needs enough cash to develop larger Delta spacecraft, which are not expected to enter service until 2026. “The Delta ships are powerful economic engines,” Michael Colglazier, the group’s president and chief executive, told employees in November as he announced a wave of layoffs. “To bring them into service, we need to extend our strong financial position and reduce our reliance on unpredictable capital markets.
“We will accomplish this, but it requires us to redirect our resources toward the Delta ships while streamlining and reducing our work outside of the Delta program.”
Wall Street analysts wonder if, and when, the company might have to ask investors for more money. Branson has now indicated that he does not plan for Virgin to provide funds.
Earlier this year Virgin Orbit – another space business in the billionaire’s empire, which focused on launching satellites – filed for bankruptcy after failing to find new funding in the face of a cash crunch. Hundreds of employees lost their jobs.