The Virgin Galactic stock price has crashed to a record low as concerns about its going concern continued. SPCE crashed to a low of $3.36, bringing the year-to-date losses to 42%.
It has dropped by almost 90% in the last twelve months, bringing its market cap to over $123 million. This means that it has had a $12 billion wipeout as it had a market cap of $13 billion at its peak. So, does Richard Branson’s SPCE have a future?
Virgin Galactic future is at risk
Virgin Galactic is a company that aims to become a major player in the space tourism industry.
Established in the early 2000s, the firm has been building its spacecraft and other equipment through the backing of Richard Branson.
After conducting successful tests in 2022, the company is now working on its Delta SpaceShip, which will have more capacity. The management hopes that the first spaceship carrying research payloads will blast off in the summer of next year.
It will then start the first astronaut spaceflights in the fall of next year, while the ship’s assembly will kick off in March this year.
The company hopes that its space trips will become profitable as it ramps up production in the coming years.
However, the biggest concern is whether Virgin Galactic has adequate cash to last through that period. It ended the last quarter with over $657 million in cash and short-term investments.
While this a big number, the company is still not making any money, and its losses are substantial. It lost over $76 million in the last quarter as its gross expenses rose to $82 million. For the year, the company had a net loss of over $347 million.
As such, if it loses the same amount this year, it will remain with $310 million in cash, which will not be enough to push it in the next few years.
Read more: SPCE stock analysis: is it safe to buy the Virgin Galactic dip?
Virgin Galactic has bankruptcy risks
The best source of capital for a company like Virgin Galactic has always been the stock market. In this, the company just issues new shares, a move that dilutes existing shareholders.
The challenge for SPCE is that its equity valuation has dropped to $123 million, meaning that such fundrasing will not be enough.
Also, Richard Branson has ruled out extending more capital to the company. Most importantly, Virgin Galactic has accumulated substantial debt in the past few years. It has over $2.7 billion in liabilities, with convertible senior notes being $420 million and other long-term liabilities being $68 million. This means that it has substantial bankruptcy risks.
The other challenge is that the space travel industry is highly competitive, with its biggest competitors like Blue Origin and SpaceX having an infinite source of money.
Read more: Avoid Virgin Galactic stock: buy Rocket Lab instead
SPCE stock price analysis
SPCE chart by TradingView
The daily chart shows that the SPCE share price has been in a strong downtrend for a long time. This sell-off intensified as its cash burn trajectory increased.
SPCE has crashed below the key support level at $5.25, the lowest swing in August 2024. It moved below the descending triangle pattern, a popular bearish sign.
Virgin Galactic stock has remained below the 50-day moving average, while the MACD and the Relative Strength Index (RSI) have continued falling, a sign that the downtrend has the momentum.
Therefore, the stock will likely keep falling as sellers target the next key support level at $2.5. The only caveat for the bearish view is that SPCE is a highly shorted company, meaning that a short squeeze is possible.
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