Shares of Sir Richard Branson’s space tourism startup Virgin Galactic fell more than 10% Monday morning, as markets reacted to the postponement of its highly-anticipated spaceflight test later this month.
Virgin Galactic CEO Michael Colglazier said in a statement that, following “recent direction” from the New Mexico Department of Health concerning Covid-19, Virgin Galactic will be “minimizing our New Mexico operations to the greatest degree possible”— meaning the company’s planned space flight test, which had been set for between November 19th and 23rd, will now be rescheduled.
The decision will deny Virgin and Branson the opportunity to end 2020 on a literal high. A successful space launch would likely have provided rare relief after a year in which the pandemic brought Branson’s business empire to its knees.
It has also taken a bite out of Branson’s fortune. Galactic stock dropped to $19.90 per share as of 12:30 pm ET Monday, down 10.9% from Friday’s close price of $22.20, helping lop around $200 million off the British mogul’s net worth. Forbes estimates that Branson is now worth $4.8 billion.
Virgin Galactic has only been publicly traded since October 2019, when Branson first listed its shares on the New York Stock Exchange, at a price of around $12 each. The stock soared to $37 in January 2020 as celebrities signed up and expectations rose, but has since come back to Earth due to the Covid-19 pandemic.
In May through June, with the coronavirus grounding his Virgin Atlantic airplanes and scuppering the maiden voyage of his cruise ship business, Branson sold $500 million worth of Virgin Galactic stock to help fund a restructuring of the Virgin Group.
Despite the delay, Virgin Galactic remains the most exciting arm of Branson’s business empire. An equity research note from investment bank Cowen in August championed a “remarkable backlog of demand for commercial spaceflight” and cited the future potential revenue-generating value for Galactic’s plan for high-speed, point-to-point travel through space, which Cowen optimistically claims could be a $200 billion market by 2050. Morgan Stanley, typically bullish, claims that Virgin’s hypersonic P2P travel offering could be worth $800 billion in annual sales by 2040.
Unlike the typical crystal ball valuations of space innovation, like Morgan Stanley’s recent a $100 billion valuation of Elon Musk’s SpaceX, Cowen tested the strength of interest among “high-net-worth individuals” to fly to space at a ticket price of $250,000 or more.
The bank found that 39% of people with a net worth of more than $5 million would pay at least a quarter-million dollars for a Virgin Galactic flight, adding that Virgin Galactic is “uniquely positioned to benefit from the growing consumer interest toward luxury experiences, especially among high-net-worth individuals.” The company already has 600 reservations for spaceflights, Cowen says, and a recruitment drive that has brought in staff from both NASA and Disney.
There is also good news for Branson coming from Galactic’s sister company, Virgin Orbit. A spokesperson confirmed that the small satellite launch business (which is based in California and was spun out of Virgin Galactic in 2017) has not been disrupted by the measures taken in New Mexico, and that Orbit is still “working away” on the final stages of its second launch attempt pencilled in for December this year.