On Monday public investors will have their first chance to buy stock in a space tourism venture when Sir Richard Branson’s Virgin Galactic lists on the New York Stock Exchange.
The company’s shares will begin trading after it raised $800m in a deal with Social Capital Hedosophia Holdings, a cash shell begun by former Facebook executive Chamath Palihapitiya. The arrangement, attributing an enterprise value of $1.5bn to the company, has allowed Virgin Galactic to raise capital while sidestepping the traditional IPO process.
Virgin Galactic’s public debut marks a key moment in Sir Richard’s wager that wealthy individuals will pay top dollar for recreational space flights, an area that has attracted fellow billionaires Jeff Bezos and Elon Musk.
The company has attracted 600 customers who have pledged to pay up to $250,000 to be sent into space, including Justin Bieber and Leonardo DiCaprio.
Virgin Galactic has not yet launched a commercial flight for paying customers. The company projected it would lose money on $31m of revenues next year but reach positive earnings in 2021, assuming the launch of 115 flights generating revenues of $210m.
Although listed companies like Boeing and Lockheed Martin are involved in space flight, Virgin Galactic will be the first to specifically focus on space tourism.
The listing comes during a turbulent period for high-profile companies entering public markets. Shares in Uber are down nearly 30 per cent since its May listing, while shares in its ride-hailing rival Lyft have lost nearly 40 per cent of their value since their March debut.
“These are tough times in the IPO market,” said Matt Kennedy, senior IPO strategist for Renaissance Capital. “If investors are not making money in the IPO market that makes everyone more cautious.”
The space tourism sector offers risk and excitement — for both investors and consumers.
“Anybody who signs up to be a space tourist is taking a risk with their own personal lives — it’s not just risky from a financial point of view,” says Laura Seward Forczyk, founder of the space sector consulting firm Astralytical.
Virgin Galactic aimed to launch commercial flights by 2009 but has faced a series of setbacks, including the death of a pilot in a 2014 test flight.
But in December, a test flight reached the edge of space for the first time, placing Virgin Galactic ahead of Mr Musk’s SpaceX and Mr Bezos’ Blue Origin, which both aim to launch space tourism operations but have yet to send people to space in commercial vehicles.
Earlier this month, Boeing agreed to invest $20m from its start-up investment arm HorizonX Ventures into the group when it lists.
The listing will also test Mr Palihapitiya’s vision of reinventing the IPO process. Mr Palihapitiya has said he plans to start more special purpose acquisition companies (spacs) helping tech companies go public.
“It would require different sizes and different vehicles, but absolutely, we would do it again,” he told the FT in July.
Additional reporting by Andrew Edgecliffe-Johnson