Virgin Galactic (SPCE) stock rose 27% Thursday after the commercial space travel company announced it will cut 18% of its workforce and shift to new spacecraft that are expected to be more profitable.
Virgin Galactic has completed six spaceflights in less than half a year using its initial Unity spacecraft, but expects to pause those flights in mid-2024 as it transitions to its new Delta spacecraft. Virgin Galactic also said it would lay off about 185 workers.
“The big step we’re taking here is to shift resources that were allocated to Unity flights and redirect them to accomplish the Delta Ships mission using the funds we have available,” said Michael Colglazier, CEO of Virgin Galactic. Analysts during the company’s third-quarter earnings call.
Delta will be able to carry 50% more passengers than Unity, twice a week. The spacecraft is expected to allow the company to achieve positive cash flow by 2026.
The company also said it now expects revenue of $3 million for the fourth quarter versus analyst estimates of $1.58 million.
The high interest rate environment is pushing capital-intensive space-related companies to cut costs and devise ways to survive what may be turbulent times ahead.
The founders of rocket launch services startup Astra Space (ASTR) on Thursday offered to take the company private.
The startup went public via SPAC in 2021 and the stock reached $185 per share. The shares are now worth more than $1 each as the company struggles to secure more financing for its operations.
“We’re in a risky time for space startups, because they’ve been living for a long time, with low interest rates, with essentially free money,” Eric Berger, senior space editor at Ars Technica, told Yahoo Finance Live earlier this year. “.
In April, satellite launch startup Virgin Orbit filed for Chapter 11 after failing to secure financing.
“A lot of these companies, including Virgin Orbit, are still a long way from being profitable, or certainly positive cash flow,” Berger said.
On Wednesday afternoon, Virgin Galactic’s CEO sounded optimistic that some of its biggest expenses, such as engineering and factory infrastructure, are in the rearview mirror.
“The need for cash on hand is less than what you have seen from us in the past,” he said.
Virgin Galactic’s stock movement on Thursday could be attributed to a short squeeze. Short interest in the stock is above 22% of the float, which is a relatively high level. Year-to-date shares are down more than 40%.
Ines is the chief business correspondent at Yahoo Finance. Follow her on Twitter at @ines_ferre.
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