by Douglas Messier
Virgin Galactic Chairman Chamath Palihapitiya was on a financial news network yesterday denying the stock was a bubble, a claim that hasn’t aged well in the short term.
With shares soaring to a high of $41.55 only a week ago, they are hovering at around $23 as I writing this story. The shares were offered at $12 when Virgin Galactic went public last Oct. 28 and rose sharply in recent weeks.
The shares slid after Virgin Galactic reported a larger than expected loss for the fourth quarter 2019 and hinted at delays in the start of commercial suborbital flights, which were to have started in June. Analysts have downgraded the stock based on the earnings report.
Virgin Galactic has spent more than $1 billion since it announced the SpaceShipTwo suborbital space tourism project in September 2004. It has never had a profitable quarter.
The spread of the coronavirus around the world has also sent stocks sliding sharply this week.
Palihapitiya claimed that demand is soaring for trips to space at a cost of hundreds of thousands of dollars apiece. He also said there is a dearth of other companies for investors to put money into at the moment.
Virgin Galactic told investors on Tuesday that it has received 7,957 “registrations of interest” from potential customers since its first spaceflight in December 2018, which Palihapitiya quantified in terms of the company’s possible future revenue.
“If those 8,000 people — just those 8,000 people — it doesn’t seem like a lot but, when you think that the price could be around $300,000, that’s $2.4 billion of pipeline,” Palihapitiya said.
Nobody on this financial news show bothered to ask what “registrations of interest” actually entail. Near as I can tell, it involves filling out a form on Virgin’s website that puts you on an email list by which the company can solicit $1,000 refundable deposits and try to convert it into a ticket costing $300,000 or more.
“Registrations of interest” is a rather vague term. It doesn’t mean everyone who signed up is actually capable of affording a flight. It doesn’t mean Virgin Galactic will be able to convert all those who can afford a ticket.
So, the number can be easily manipulated. And it wouldn’t be the first time that happened.
When Richard Branson and New Mexico Gov. Bill Richardson unveiled a plan for state taxpayers to spend $200 million building Spaceport America as the company’s operating base, they boasted of the number of registrations in their press release.
“Currently, there are 40,000 registrations from individuals from 120 countries,” the document said. “Virgin has an unprecedented record of innovation, past performance in implementing new commercial ventures, demonstrated insightful leadership, and sound business planning.”
That same release predicted Virgin Galactic would fly 50,000 space tourists by the end of 2019. The total to date has been zero.
Nobody on the show asked Palihapitiya is whether Virgin Galactic’s fleet of SpaceShipTwo vehicles are robust enough to fly 8,000 people — a number that would greatly exceed the number that have flown since Yuri Gagarin became the first person to fly there in 1961.
The anchors also asked about insurance and what Virgin’s payout would be in the event of passenger injuries or deaths on the flights. Palihapitiya assured them there would be an insurance plan in place.
This was strange in that under federal and state law, passengers are flying at their own risk. Virgin isn’t liable for injuries or deaths unless the company is grossly negligent or intentionally harmed a passenger. The hosts were apparently unaware of these laws.