Virgin Galactic Falls On Space Tourism Setback: What Investors Should Know

A test flight of the VSS Unity from Virgin Galactic Holdings SPCE returned home early after an ignition failure on Saturday.

The onboard computer lost connection, which the company said triggered a fail-safe scenario that intentionally halted ignition of the rocket motor. This method is designed to default to a safe state whenever power or communication with sensors is lost.

“Our flight landed beautifully, with pilots, planes and spaceship safe, secure, and in excellent shape – the foundation of every successful mission!” said Virgin Galactic CEO Michael Colglazier.

Related Link: Analyzing Virgin Galactic’s Unusual Options Activity

Why It’s Important: The launch was considered a failure by some, but also could show the strong safety measures put in place by the company as it works to take tourists to space.

The test flight had been delayed due to COVID-19 restrictions put in place in the state of New Mexico, home to Virgin Galactic’s launches. This launch could now push the timeline for the company to take tourists to space back.

Virgin Galactic recently signed a deal with NASA Flight Opportunities to provide flight and integration services for payloads. NASA was looking to sign additional payload deals with companies like Virgin Galactic.

What’s Next: The company plans on assessing a repeat of this test flight. That flight will include mission specialists in the cabin and also NASA payloads.

A successful flight after that could lead to the company launching a test flight with company founder Sir Richard Branson.

The company has collected deposits from 600 customers who have paid $250,000 each to board a Virgin Galactic flight to space in the future, according to The Verge. The company has said the price will change over time. Ticker sales for future flights are expected to reopen next year.

Benzinga’s Take: A sell-off on Monday could quickly become an overreaction for investors who think the company will be able to complete its test flights and begin taking tourists to space.

The company has strong customer interest and is one of a few publicly traded space pure-play stocks.

SPCE Price Action: Shares of Virgin Galactic are down 16% to $27 in early trading. Shares closed at $32.04 on Friday ahead of the test flight.

View from Space on Virgin Galactic's First Spaceflight