“Back On The Biz Beat As Another Big NM Economic Hope Encounters Harsh Reality And A Crashing Stock”
New Mexico Politics with Joe Monahan
August 17, 2023
Virgin Galactic numbers are frightful and Wall Street runs. That development follows warning flags over Maxeon’s big solar announcement.
We reported on the financial peril facing the state’s latest big economic catch as the stock of Maxeon crashed 32 percent on the very day top elected officials gathered with biz leaders to announce the company’s new solar manufacturing plant for ABQ’s Mea del Sol last Monday. Now there’s more news the state needs to know about another company long held out as a potential major economic driver. . .
The stock of Virgin Galactic, the chief tenant of Spaceport America Spaceport near T or C, crashed to an all time low last Wednesday of $2.62 a share, the lowest since the stock went public on the NASDAQ in 2019.
The crash is despite Virgin’s success this month in finally launching the first paying tourists into suborbital space who pay up to $400,000 for the privilege of experiencing a few minutes of weightlessness in sub-orbit.
It turns out the company piloted by billionaire Richard Branson has a broken business model and there are serious doubts it can ever be repaired, thus the cratering of the stock.
This is vital information for New Mexico legislators and local leaders to digest as Spaceport operations continue to get an annual legislative subsidy from taxpayers, in addition to the main funding from a voter approved tax passed in 2007.
Clearly, with the red flags flying on Wall Street state leadership needs to prepare to reimagine the Spaceport without Virgin Galactic:
–-The long-term business model isn’t based around the current version of the spacecraft. A second-generation spacecraft is in the early stages of development, and that is what management believes will lead to a profitable operation. This isn’t exactly a ringing endorsement of the current business, noting that the facilities to build the next class of ship aren’t expected to be operating until 2024, with spacecraft testing set for 2025, and a first commercial flight not anticipated in 2026.
–In the second quarter, Virgin lost $134 million and had negative free cash flow of $135 million. That’s not sustainable. In fact, for the second half of 2023, management expects negative cash flow of (up to) $260 million. That compares to roughly $980 million of cash and investments on the company’s balance sheet. At the projected burn rate Virgin Galactic is a bit shy of two years’ worth of cash. It isn’t going to make it until 2026 without raising more capital. And that’s exactly what the company did in the second quarter, issuing 55 million shares of common stock to raise $241 million for the business.
–There are clear warning bells at Virgin Galactic that investors need to listen to. Maybe the company manages to pull off the long-term plan and creates a sustainable business by 2026. But the risks seem like they outweigh the rewards right now as the company loses money, burns cash, and sells stock (despite a massive share price decline) to help fund its huge capital investment plans.
It’s been a couple of busy business weeks in New Mexico but the champagne corks need to be put back on the bottles. You might not know that from the cheerleading coming from the politicos and the mainstream media but with a little digging the truth turns up–and it’s exclusively yours courtesy of. . .
The home of New Mexico Politics
“The commercial debut officially inaugurates Virgin Galactic into the ranks of tomorrow’s space tourism providers alongside Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin LLC. Virgin Galactic has said it plans to move soon to a regular cadence of monthly commercial flights, generating much-needed revenue.
On Thursday, August12, 2023, Virgin Galactic launched another historic space tourism flight – the first with paying, civilian customers. The company is the largest tenant at Spaceport America, which has had hundreds of millions of taxpayer dollars supporting it.”
Forgive me, but I am at a loss in that, for the past 15 years I’ve lived in Spaceportland [and guess I’m supporting it], I have had great hopes for Spaceport America’s eventual contribution to our society’s future. But, what I’m lost about is: space tourism promoted by billionaires inane competition? As one of the little people, I could care less. Tell me, someone please, what is the envisioned goal in the future of Spaceport America? What was its lofty vision of the future in the first place? It must be something more than kiddie rides on a techno-blowout ferris wheel only the rich can afford!
I’m not sure who came up with the idea that we should forego taxing the half-million dollar tickets for the bloody rich to ride their rocket into space. We pay over 8% tax on our groceries, restaurant meals and everything else we consume but those elites can skate by without a tax on THEIR entertainment at our expense!! Dumb, dumb, dumb. Can we take that back??? I wasn’t here when they decide that but………….. I think we should renege on that.
Dennis, groceries aren’t taxed, but I agree with your comment in entirety, otherwise.