Virgin Galactic Holdings (NYSE:SPCE) recently disclosed its plans to raise an additional $400 million through a new stock offering. Following the news, SPCE stock fell 14% in yesterday’s extended trading session after declining about 7% during the regular session.
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The recent decline in SPCE’s share price partially offsets the significant rally the stock has experienced since June 16. During that period, the stock surged by 31%. The increase was primarily attributed to the announcement made by Virgin Galactic Holdings that its first commercial spaceflight service would commence in late June, beginning with a scientific research mission.
Details on Capital Raise
As per an SEC filing, Virgin Galactic has entered into a distribution agency agreement with the U.S.-based investment management arms of Morgan Stanley (MS), Goldman Sachs (GS), and Credit Suisse (CS).
The company plans to use the net proceeds from the stock offering for the development of its spaceship fleet and the expansion of its commercial operations. Also, some of the funds will be used for general corporate purposes, including working capital and general and administrative matters.
It is indeed worth noting that prior to the recent announcement of the new stock offering, Virgin Galactic had already raised $300 million through an at-the-market offering of common stock under a prior distribution agency agreement dated August 4, 2022.
Is SPCE Stock a Good Buy?
Virgin Galactic’s decision to continuously offer new shares to raise cash does carry the potential risk of significant dilution for existing shareholders. Additionally, if Virgin Galactic faces delays or fails to commence its commercial flights as planned, it could indeed undermine investor confidence in the stock.
Turning to Wall Street, Virgin Galactic has a Moderate Sell consensus rating based on four Holds and three Sells assigned in the past three months. At $3.81, the average Virgin Galactic stock price target implies 28.4% downside potential.
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