Shares of Virgin Galactic (NYSE:SPCE) had climbed a modest 2.3% by noon EDT on Monday, but today’s big news isn’t about Virgin Galactic at all. Instead, it involves its sister company, Virgin Orbit.
This morning, the special purpose acquisition company (SPAC) NextGen Acquisition II announced that it has signed a definitive agreement to take Virgin Orbit public in a reverse merger IPO that values the company at $3.2 billion.
In this deal, NextGen will bring its $383 million in cash to the table, and run a $100 million private investment in public equity (PIPE) transaction, in which Boeing (NYSE:BA) will participate. This will all result in a newly public Virgin Orbit having $483 million in cash to deploy once it becomes an independent company (with the ticker symbol VORB).
NextGen Acquisition stock is up about the same as Virgin Galactic today, 2%.
So is this a case of mistaken identity, with investors seeing news about satellite-launcher Virgin Orbit and assuming it refers to space tourism company Virgin Galactic?
Not necessarily. Still, my guess is that the name Boeing is a big part of why Virgin Galactic is flying higher on Virgin Orbit’s news. Investors might be interpreting Boeing’s interest in owning a piece of Virgin Orbit as suggesting that it might also take an interest in (or even buy) Virgin Galactic at some point. They may not be wrong about that.
Since its founder flew to space last month, Virgin Galactic has seen its shares lose roughly half their value, making them 50% cheaper to any potential acquirer. The company is bleeding cash, and won’t begin collecting revenue in any volume for at least another year, when it finally begins flying passengers to space commercially. Until then, there’s plenty of time for the stock to become even cheaper, and for an opportunistic acquirer like Boeing to swoop in.
In short, just because Boeing is buying into Virgin Orbit today, doesn’t mean it won’t do the same thing with Virgin Galactic tomorrow.
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