- Parabolic Arc
- November 29, 2023
Shareholders Urge Virgin Galactic to Reduce Spending, Staff
An open letter signed by more than 600 people has urged suborbital flight provider Virgin Galactic (NYSE: SPCE) to reduce spending and to lay off employees in order to conserve cash and raise the company’s low share price.
“We want to submit a heartfelt plea, for you and the leadership team to cut opex [operational expenditure] costs and thus lower the cash-burn,” reads the letter, which was first published as a Change.org petition on September 27. “At the time of writing, VG’s share-price is $1.7, down c70% from June this year. In spite of the c$900m on the balance sheet, there is a very present danger that the price could keep falling until the company is delisted this or next year. Ordinarily, this would not be an existential risk for a business, but VG needs at least $1bn (maybe $2bn on a bad day) to commission the delta fleet and reach profitability; without ongoing access to the public market, optionality for fundraising routes will be severely limited.”
The letter was “predominately written” and posted by Andy Shovel, a London-based investor and Virgin Galactic shareholder. It had been signed by 646 people as of press time.
“I had a call with their VP of Investor Relations, Eric [Cerny]. He runs their earnings calls,” Shovel said in a written response to Parabolic Arc. “I got across my concerns and the concerns of the fellow shareholders. He told me the leadership team had read the open letter and watched my interview with Martyn Lucas.
“We chatted for around an hour and he assured me that the company would consider putting out better comms to retail investors, and that they are more focused than I thought when it came to cash flow management,” Shovel added.
Shovel said he will wait until Virgin Galactic reports its third-quarter 2023 results in November before deciding whether to take any additional steps on the issue.
Virgin Galactic did not respond to multiple requests for comment.
Virgin Galactic’s commercial flights
Virgin Galactic began commercial suborbital flights in June with a single SpaceShipTwo, VSS Unity, after nearly 19 years of development and testing. The spacecraft, which is air-launched from a WhiteKnightTwo carrier aircraft, is capable of flying once per month with as many as four paying customers aboard. To date, the spacecraft has carried 12 paying customers on four commercial flights.
The company is in the midst of developing an advanced fleet of Delta-class SpaceShipTwos that will be able to fly once per week with as many as six passengers. Company officials have said they expect the Delta-class SpaceShipTwos will be available for flight tests in 2025 and enter service the following year. Virgin Galactic is also developing a fleet of WhiteKnightTwo motherships to carry them.
Virgin Galactic officials have said the Delta-class vehicles are key to the company’s profitability. They have said the company will be spending heavily on developing new spacecraft and aircraft over the next several years. In the meantime, revenues will be limited by VSS Unity‘s low flight rate and smaller passenger capacity.
The letter argued that the company’s quarterly burn rate of roughly $130 million is unsustainable beyond about 18 months. It also that any attempts to raise additional funds given the current macro-economic conditions “will lead to very punishing terms for shareholders.”
“We would submit the challenge – whilst the company is 2-3 years away from weekly+ spaceflights, does it need 1,100 staff? Are all of those staff members absolutely fundamental to the business needs in the near-term, whilst the annual revenue ceiling is under $15m and one spaceship is being operated?” the open letter said.
The letter urged Virgin Galactic to expand its options beyond suborbital space tourism flights in order to find new ways of increasing revenue and the share price.
“For the avoidance of doubt – the 50 mile high flights are historic and boundlessly impressive in their own right. But us shareholders feel that there’s room for the company to position itself as a future leader in the space travel industry, beyond just 90 minute flights for entertainment and memory-making,” the letter said. “Obviously those are the focus today, but we feel a strong sense of surprise that the company has not yet shared a roadmap towards offering a suite of space-tourism services, which could improve international travel times, send passengers into orbit, or perhaps there could even be a VG space-station one day.”
In the past, Virgin Galactic has discussed developing a point-to-point suborbital vehicle capable of rapidly carrying passengers between distant locations on Earth. However, the company has not mentioned the plan for several years, and there is no mention of it on its website. Company officials have said they primarily focused on launching the Delta-class spaceships in 2026.