Education of the Chattering Class: New Book Should Open Some Eyes on Wall Street

by Douglas Messier
Managing Editor

One of the fascinating things to watch since Virgin Galactic went public 18 months ago has been stock analysts’ and other supposed experts’ takes on the company. I’ve read articles, watched YouTube videos and CNBC reports, and closely followed quarterly earnings calls.

My conclusion: most of them didn’t have a clue.

They didn’t understand the limits of the technology, the risks involved or the history of a company notorious for spin, unrealistic forecasts, excessive spending and failing to deliver on any of its extravagant promises over its entire existence. Virgin Galactic hasn’t flown a single tourist in 16 plus years, but for some reason people bought into its promises of developing much more difficult hypersonic/supersonic travel. Why?

Well, they’re going to get one hell of an education starting tomorrow. That’s when Nicholas Schmidle’s book, Test Gods: Virgin Galactic and the Making of a Modern Astronaut, goes on sale. The author was embedded with the company for several years and was provided unprecedented access to meeting and documents.

I haven’t read the book yet, but some interesting things have become public that I’ve already written about here. For instance, Virgin Galactic nearly suffered a second tragedy when VSS Unity sustained severe damage that came perilously close to destroying it and killing its three member crew. The VP of safety subsequently stepped down because he had lost confidence in Virgin Galactic’s safety culture.

[See: Virgin Galactic’s Second Suborbital Flight Nearly Destroyed Ship and Killed Crew]

Virgin’s Galactic’s president dismissed flight estimates produced by the CFO as a “pipe dream.” Similarly rosy predictions were used to sell the merger by which the company went public.

[See: Book: Virgin Galactic’s President Moses Believed Company’s Flight Projections were a “Pipe Dream”]

They will also get an in-depth account of the 2014 crash that destroyed VSS Enterprise and killed Scaled Composites test pilot Mike Alsbury.

[See: 3 Seconds to Disaster: The SpaceShipTwo Accident]

What these stock experts will discover reading the book is what people in Mojave and followers of this blog have long known: Virgin Galactic’s technology looks better than it actually is, the company has long suffered from bad management and a broken safety culture, and much of what the Virgin Galactic has said over the years has been disconnected from reality.

Most important, they should understand just how risky these flights have been. This technology is very much on the edge. There are no government safety regulations to protect passengers and crew. And spaceflight participants must sign away most of their rights to sue in the event of injury or death.

Virgin Galactic originally planned to report first quarter earnings losses tomorrow. On Friday, the company postponed the release by six days until Monday, May 10, nominally so it could restate its financials for 2019 and 2020 due to a Securities and Exchange Commission statement on how stock warrants should be treated.

[See: Virgin Galactic Delays Quarterly Earnings Report as Blue Origin Ticket Sales Announcement Looms]

My guess is the real reason is Virgin Galactic wanted to be able to respond to rival Blue Origin’s plan to begin selling tickets on the New Shepard suborbital vehicle on May 5. Jeff Bezos’ company is expected to announce ticket prices and a schedule for the start of commercial flights.

It’s not clear whether the book release was a factor in the delay. Review copies are already out there for the media. It’s likely that the company has a good idea of what’s in it. There might have been a pre-publication review of the manuscript.

Stories will likely be all over the media for the next week. When company officials do their earnings call, whatever message they want to deliver could well be overwhelmed by questions about the revelations in the book. Or perhaps the impact of the news will diminish by then.

Virgin Galactic has proven as expert at spin as it has been incapable at delivering on its promises. Analysts and reporters have been remarkable receptive to the company’s public relations, and quite reluctant to get on its bad side by raising difficult questions. When you do, you don’t get your inquiries answered or invited to the company’s events.

Virgin Galactic occupies a curious position: not sufficiently successful or important enough to pay that much attention to in an industry dominated by SpaceX, which is sending tourists into orbit; but so high profile that nobody wants to alienate the company.

That Virgin Galactic will be risking passengers lives in an unregulated industry that largely protects its billionaire owners from liability while pursuing a program that has already killed four people and left four others hospitalized doesn’t seem to matter all that much. There’s an acceptance of the risk and legal regime that’s been put in place that might look complacent in retrospect a few years from now.

We will see if that changes. It should be an interesting week.