Virgin Galactic is Looking Up

There are many things to like about Virgin Galactic.

One of our tenets is that “We don’t invest in products or companies, we invest in people.” What this means is that a prospective holding could have the greatest product and company on earth, but with bad people (especially the core leadership group), the investment is extremely high risk.

Richard Branson, the visionary behind Virgin Galactic, is known for his comments on business ethics. Some of them have made great quotes, such as like the one below from his Virgin blog:

“Being an ethical business and being a successful one are not opposites. They are two side of the same coin.”

There are several check points we look at when evaluating investments. Check points usually take the form of questions that help gain clarity about the venture’s growth prospects, such as:

• Is there a large benefactor segment with unmet desires/needs?
• Does the organization have a history of stellar execution?
• Are the key leaders of the venture reliable, ethical, and passionate?

At this point, there are very few people that absolutely need to go to space; however there are tons that desire to. Many desire to go so badly that they “need” to go. The benefactor segment is very large.

Branson has said the plan is to reduce the cost of Voyager tickets in the coming years, which will naturally allow many more people to make the purchase. According to Virgin Galactic’s Q3-2019 financial results, the company has already secured 600 reservations and $80 Million in deposits. YTD, the venture has taken an approximate $138 Million net loss, which is somewhat expected for a venture of this magnitude.

Since going public, the stock (NYSE: SPCE) has retracted approximately 37.5%; causing quite a sting for those who jumped on the stock right at the first opening bell.

The Virgin Group does have an impressive record from an execution standpoint. At this point there are few industries they haven’t planted a flag. And among their larger holdings, they’re formidable contenders in each market they maintain a presence.

From a leadership standpoint for Virgin Galactic, the venture is in good hands with Branson. The collection of media appearances indicate that ethics is something he takes seriously. Our comment here needs to be taken with a proviso, because ethical leadership is fluid rather than static, and a leader is only as ethical as his/her next decision.

Despite the YTD net loss, the fact that all of the available reservations for Virgin Galactic have sold is a positive indicator. Many articles online talk about the $250,000 price tag; however, some have actually paid much much more than that. Which is another favorable indicator in and of itself.

If they can maintain their current reservation rates over the next 2-3 years, things at Virgin Galactic are looking up.

Blessings.