Virgin Galactic, a prominent name in the space tourism industry, has been making headlines with its recent financial announcements. The company, known for its ambitious plans to send tourists to space, is currently in a transition phase. While the "build phase" of its new fleet of Delta-class spaceplanes is underway and it's shifting to design work on the new "mothership," the actual commercial flights are set to begin only in 2026. However, this hasn't stopped the company from facing challenges and making strategic decisions.

Virgin Galactic's Journey from Rockets to Stocks

Virgin Galactic's Current Financial Situation

The past few months have been crucial for Virgin Galactic. Its Unity spaceplane completed its last batch of space tourist flights in June and entered retirement. Since then, there have been no paying customers sent to space. This has led to a significant drop in revenue, with only $402,000 collected in the past quarter. Despite the decline in costs due to no flights happening (down 29%), the company still had to spend $82.1 million on development and operating costs. As a result, Virgin Galactic lost $72.7 million or $2.66 per share, with a 49% increase in the share count.Moreover, the cash burn rate accelerated to $118 million in the quarter, which is a cause for concern. However, the company does have $744 million in cash and equivalents. Assuming a constant burn rate, this would keep the company in business for another six quarters, bridging the gap until 2026 when the Delta-class spaceplanes are expected to start flying. But management predicts that the cash burn will keep rising, with estimates between $115 million and $125 million in the current fourth quarter.

The Strategy of Selling Stock

Given the tight financial situation and the uncertainties in the space industry, Virgin Galactic has decided to sell more stock. Just after reporting its third-quarter earnings, the company announced it will issue and sell another $300 million worth of stock "from time to time." The money will be used to build an additional mothership and a third and fourth Delta spaceplane, indicating that management believes the current cash will be sufficient for the first two Deltas and the first new mothership.However, it's important to note that raising $300 million at the current $7 share price will require issuing roughly 42 million new shares, which is a 50% increase in the outstanding shares. This means existing shareholders will be diluted by a staggering 150%.

The Future Outlook for Virgin Galactic

So, should investors buy or sell Virgin Galactic stock now? Considering the best-case scenario, where the company remains solvent throughout 2026 despite potential delays, and the fact that even if it succeeds in getting back to business, shareholders will own a much smaller portion of future profits due to dilution, there seems to be little reason to own this stock.In conclusion, Virgin Galactic's path to commercial spaceflight is filled with uncertainties and challenges. While the company is making efforts to move forward, the current financial situation and the decision to sell more stock raise questions about its future. Investors need to carefully consider these factors before making any investment decisions.