Virgin Galactic (SPCE) stock slid 16% on Thursday after announcing a $425 million convertible bond offering. Shares of the space tourism company have had a bumpy start to the new year. The stock is down more than 22% in the first couple of weeks of trading in 2022 amid broader market concerns of tighter Fed monetary policy.
The convertible senior notes due 2027 will be part of “a private offering to persons reasonably believed to be qualified institutional buyers,” according to a statement from the company.
Virgin Galactic says it intends to use the net proceeds “to fund working capital, general and administrative matters and capital expenditures to accelerate the development of its spacecraft fleet in order to facilitate high-volume commercial service.”
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Virgin Galactic has had a series of delays related to the launch of its commercial tourism operations. The company expects to start taking tourists to the edge of space in the fourth quarter of this year due to upgrades which have taken longer than expected.
Last year, Virgin Galactic founder Sir Richard Branson successfully touched the edge of space in a highly publicized launch. Branson became the first person to travel to the edge of space in his own company’s vehicle.
2021 was a huge year for space investing and historic flights spearheaded by billionaires Elon Musk, Jeff Bezos and Sir Richard Branson.
In connection with the pricing of the notes, Virgin Galactic expects to negotiate what are called capped call transactions. These are intended to reduce common stock dilution when the notes are converted.
Virgin Galactic also intends to use a portion of the net proceeds from the offering to fund the cost of entering into the capped call transactions.
Shares of Virgin Galactic declined more than 40% in 2021. They reached an intraday 52-week high of $62.80 in June of last year. On Thursday the stock was trading at around $10.37 during the morning session.
Ines is a markets reporter covering stocks from the floor of the New York Stock Exchange. Follow her on Twitter at @ines_ferre