<ul class="summary-list"><li>Shares of <keyword id="11969632" type="UNKNOWN" weightage="60" keywordseo="virgin-galactic" source="Orion">Virgin Galactic</keyword> soared after the FAA cleared the company to operate flights again.</li><li>Virgin Galactic flights were grounded pending an FAA investigation.</li><li>The FAA was probing a mishap from Sir Richard Branson's trip in July.</li></ul>Shares of <a href="https://markets.businessinsider.com/stocks/spce-stock?utm_source=markets&amp;utm_medium=ingest?utm_source=markets&amp;utm_medium=ingestm=ingest" target="_blank" rel="noopener">Virgin Galactic</a> soared on Thursday after the Federal Aviation Administration cleared the space tourism startup to operate flights once again following a probe of Richard Branson's high-profile <a href="https://www.businessinsider.com/richard-branson-virgin-galactic-spaceflight-out-of-clearance-zone-2021-9?utm_source=markets&amp;utm_medium=ingestgest" target="_blank" rel="noopener">trip</a> in July.Virgin Galactic's stock price rose 17% to an intraday high of $26.50 on Thursday.The aviation regulator on September 2 grounded the company - sending its shares <a href="https://markets.businessinsider.com/news/stocks/virgin-galactic-stock-price-spce-faa-investigation-branson-spaceship-mishap-2021-9">tumbling more than 7%</a> - after a piece by <a href="https://www.newyorker.com/news/news-desk/the-red-warning-light-on-richard-bransons-space-flight" target="_blank" rel="noopener">The New Yorker</a> alleged that the company's rocket ships went off-course on its way back to earth and failed to communicate the mishap to the aviation regulator."The investigation found the Virgin Galactic SpaceShipTwo vehicle deviated from its assigned airspace on its descent from space," the agency said in a statement. "The FAA also found Virgin Galactic failed to communicate the deviation to the FAA as required.The agency said it required Virgin Galactic to implement changes and allowed it to resume flight operations once the required amended protocols have been put in place.Virgin Galactic said the corrective actions proposed by the FAA were executed beginning August 11. These include updating calculations to expand the protected airspace for future flights.The widely-watched flight carried billionaire Richard Branson, founder of Virgin Galactic, and five others, taking off from a facility in New Mexico.The plane, The New Yorker reported, did not shoot to space steeply enough, causing it to deviate from its approved flight path on its way back down to Earth. While the two pilots, Dave Mackay and Mike Masucci, were able to correct the error and land safely, they flew outside their airspace clearance zone for one minute and 41 seconds."We appreciate the FAA's thorough review of this inquiry," Michael Colglazier, CEO of Virgin Galactic, said in a statement. "The updates to our airspace and real-time mission notification protocols will strengthen our preparations as we move closer to the commercial launch of our spaceflight experience."Following FAA's clearance, Virgin Galactic can now push through with its <a href="https://www.businessinsider.com/virgin-galactic-space-mission-delay-italian-air-force-manufacturing-defect-2021-9">space mission with the Italian airforce</a> called "Unity 23." It was <a href="https://investors.virgingalactic.com/news/news-details/2021/Virgin-Galactic-Announces-First-Commercial-Research-Mission/default.aspx">initially slated</a> for September or early October. It's now been pushed to mid-October at the earliest because of a possible manufacturing defect.Shares of Virgin Galactic have swung wildly in the past 12 months, jumping to as high as $62.80, and sinking as low as $14.27.

Virgin Galactic soars after FAA says company can resume flights following mishap probe

<ul class="summary-list"><li>Virgin Galactic shares could rise 33% over the next year, Jefferies said on Tuesday. </li><li>Virgin Galactic could see revenue climbing to $1.7 billion by 2030 as demand for space flights grows.</li><li>Jefferies initiated coverage on billionaire Richard Branson's company with a buy rating. </li></ul><a href="https://markets.businessinsider.com/stocks/spce-stock">Virgin Galactic</a> shares could climb by more than 30% over the next 12 months, said Jefferies, which sees the company ramping up in value as demand swells in the space tourism market. Virgin Galactic is selling tickets <a href="https://www.businessinsider.com/virgin-galactic-space-flight-ticket-cost-450000-richard-branson-2021-8ic-rocket-plane-flies-richard-branson-crew-to-space-2021-7">starting at $450,000</a> for a seat on future rides to space after <a href="https://www.businessinsider.com/virgin-galactic-rocket-plane-flies-richard-branson-crew-to-space-2021-7">July's first flight with a full crew</a>, including founder <a href="https://www.businessinsider.com/richard-branson-virgin-galactic-with-blue-origins-jeff-bezos-2021-7">Richard Branson</a>, to the <a href="https://www.businessinsider.com/blue-origin-jeff-bezos-astronaut-edge-of-space-2021-6">edge of space</a>. <a href="https://www.businessinsider.com/elon-musk-virgin-galactic-ticket-richard-branson-space-deposit-price-2021-7">Tesla CEO Elon Musk</a> reportedly is among the 600 people who have made a reservation by putting down a $10,000 deposit. "We believe Virgin Galactic has strong long-term prospects supported by a growing backlog and early mover advantage coupled with a unique experiential offering," said Jefferies equity analyst Greg Konrad in a Tuesday note initiating coverage with a buy rating. Jefferies put a 12-month price target of $33 on the stock, which represents 33% upside from Monday's closing price of $24.88. Shares during Tuesday's session rose as much as 9.4% then trimmed the advance to 8%. It said Virgin Galactic's attractive outlook is boosted as it stands to offer 660 flights a year by 2030, up from current capacity of about 36. "This supports the ability to meet demand, which is underscored by a desire to explore space coupled with an addressable market that could approach $120 billion of potential future demand and supports a rise to $1.7 billion of revenues by 2030," said Konrad. "Near-term the biggest headwind is supply, which should expand over the next three to four years capturing the financial benefits within backlog," he said. The firm estimated Virgin Galactic to have four spaceships in its fleet by 2025 then increasing to 14 spaceships and $1.7 billion of revenue in 2030 based on 3,360 passengers. Virgin Galactic shares have been whipped around during 2021, surging to as much as $62.80 in mid-February then later pushed into negative territory before recovering for a 5% gain for the year through Monday's session.

Virgin Galactic could climb 33% as demand for commercial space travel accelerates, says Jefferies

<ul class="summary-list"><li>Bank of America slashed its <a href="https://markets.businessinsider.com/stock/SPCE">Virgin Galactic</a> from $41 to $25 on Friday, representing a downgrade of 39%. </li><li id="recirc"><a href="https://www.businessinsider.com/?hprecirc-bullet"></a>Analysts cited delays in the company's commercial space flight schedule and a lack of catalysts in the short term.</li><li>Virgin Galactic fell about 1% Friday to $23.99.</li></ul>Bank of America slashed its <a href="https://markets.businessinsider.com/stock/SPCE">Virgin Galactic</a> price target by 39% on Friday, citing concerns over delays in the company's commercial space flight timeline and lack of catalysts for the stock in the short-term.Analysts led by Ronald J. Epstein lowered their price target to $25 from $41. Shares of Virgin Galactic traded just above $24 Friday afternoon and are down 4.8% for the week.BofA said that a longer maintenance for Virgin's Eve Mothership will delay the company's first commercial passenger flight to late into the third quarter of 2022 from early 2022. This will result in lower short-term earnings estimates, said the analysts. In the long term, analysts also anticipate that Virgin's shot at orbital customer travel won't come to fruition until 2035. They previously estimated 2028 for the base case.Meanwhile, Virgin Galactic lacks short-term catalysts because of the delayed commercial space flight, BofA said. The stock may also face downward pressure as the next lock-up period expires in October, they added. Virgin Galactic is up 1.9% year-to-date.

Virgin Galactic stock-price target slashed 39% by Bank of America as analysts expect delays in commercial space flight timeline

<ul class="summary-list"><li>UBS downgraded <keyword id="9249900" type="UNKNOWN" weightage="60" keywordseo="virgin-galactic-stock">Virgin Galactic stock</keyword> to "neutral," saying most optimism is already priced in. </li><li>Shares of the space flight company have gained almost 200% since mid-May.</li><li id="recirc"><a href="https://www.businessinsider.com/?hprecirc-bullet"></a>UBS Analyst Myles Walton also said the stock could face pressure in the fall amid lock up expiration. </li></ul><a href="https://markets.businessinsider.com/stocks/spce-stock">Virgin Galactic's</a> stock price doesn't have any further room to run, according to UBS.The space flight company has gained almost 200% since mid-May as it comes closer to manned flights and prepares for a voyage with Richard Branson onboard next week. However on Monday UBS analyst Myles Walton downgraded the stock from "buy" to "neutral," saying in a note to clients that most optimism around the business is already reflected in the current stock price."Going into our May upgrade, the stock had fallen on fears of flight delays and competitive pressures, but both of which are now fully receded," Walton said. "We remain optimistic in the event path ahead supported by the recent FAA operator license update, paving the way for another powered flight, just announced, for July 11th. Though we view this catalyst chain as appealing, at the stock's current levels, we do see a lot priced in."Walton also upgraded Virgin's price target to $45, from $36. Shares currently trade at $46.Walton added that the stock could face pressure in the fall as news flow around Virgin's space flight program cools off while the program undergoes maintenance. Share lock-ups from the original investor base will expire in the fall, which could also add pressure to the stock price, he said.

UBS downgrades Virgin Galactic as the bank says nearly 200% rally leaves no upside left for the stock

<ul class="summary-list"><li id="recirc"><keyword id="11969632" type="UNKNOWN" weightage="60" keywordseo="virgin-galactic" source="Orion">Virgin Galactic</keyword> tumbled after the FAA announced that its flights are grounded pending an investigation.</li><li>"Virgin Galactic may not return the SpaceShipTwo vehicle to flight until the FAA approves the final mishap investigation report," the agency said.</li><li>News of the flight's mishap surfaced after a New Yorker piece detailing how the spaceflight didn't go as smoothly as portrayed.</li></ul>Shares of <a href="https://markets.businessinsider.com/stocks/spce-stock?utm_source=markets&amp;utm_medium=ingestgest" target="_blank" rel="noopener">Virgin Galactic</a> tumbled on Thursday after the Federal Aviation Administration announced that the company's flights are grounded pending an investigation into a mishap during Sir Richard Branson's <a href="https://www.businessinsider.com/richard-branson-virgin-galactic-spaceflight-out-of-clearance-zone-2021-9">trip to space</a> in July.Virgin Galactic's stock price on Thursday slipped 7.26% to an intraday low of $24.85. "Virgin Galactic may not return the SpaceShipTwo vehicle to flight until the FAA approves the final mishap investigation report or determines the issues related to the mishap do not affect public safety," the federal agency told Insider via email.It continued: "The FAA is responsible for protecting the public during commercial space transportation launch and reentry operations."The agency confirmed that Virgin Galactic's SpaceShipTwo did deviate from its Air Traffic Control clearance as it returned to Spaceport America. It is currently investigating the July 11 incident. News of the <a href="https://www.businessinsider.com/richard-branson-virgin-galactic-spaceflight-out-of-clearance-zone-2021-9">flight's mishap</a> came to light following a piece by <a href="https://www.newyorker.com/news/news-desk/the-red-warning-light-on-richard-bransons-space-flight">The New Yorker</a> detailing how Branson's spaceflight didn't go as smoothly as it appeared.The plane, it reported, did not shoot to space steeply enough, causing it to deviate from its approved flight path on its way back down to Earth. While the two pilots, Dave Mackay and Mike Masucci, were able to correct the error and land safely, they flew outside their airspace clearance zone for one minute and 41 seconds, according to <a href="https://www.newyorker.com/news/news-desk/the-red-warning-light-on-richard-bransons-space-flight">The New Yorker</a>.Virgin Galactic <a href="https://www.businessinsider.com/richard-branson-virgin-galactic-spaceflight-out-of-clearance-zone-2021-9">told Insider</a> that <a href="https://www.newyorker.com/news/news-desk/the-red-warning-light-on-richard-bransons-space-flight">The New Yorker</a> report was "misleading."Shares of the aerospace firm have swung wildly in the past 12 months, jumping to as high as $62.80, and sinking as low as $14.27. Still, Jefferies in August put a <a href="https://markets.businessinsider.com/news/stocks/virgin-galactic-stock-price-upside-jefferies-buy-rating-branson-spce-2021-8">12-month price target</a> of $33 on the stock, which represents a roughly 23% upside from Tuesday's closing price of $26.79.

Virgin Galactic slips after the FAA says the company is grounded pending an investigation into a mishap during Branson's trip to space

<ul><li><a href="https://markets.businessinsider.com/stocks/spce-stock"></a><a href="https://markets.businessinsider.com/stocks/spce-stock">Virgin Galactic</a> fell as much as 6% on Friday after <keyword id="6376563" type="UNKNOWN" weightage="60" keywordseo="shareholders">shareholders</keyword> filed to sell up to 113 million shares.</li><li>Shareholders aim to sell up to roughly 105 million outstanding shares of common stock and up to 8 million shares of common stock issuable upon the exercise of warrants, according to a Securities and Exchange Commission <a href="https://www.sec.gov/Archives/edgar/data/1706946/000170694620000063/a424b3prospectus121420.htm">filing</a> published Thursday.</li><li>The filing doesn't specify when the selling could begin.</li><li>The filing comes as shares sit roughly 120% higher year-to-date.</li><li><a href="https://markets.businessinsider.com/stocks/spce-stock">Watch Virgin Galactic trade live here</a>.</li></ul><a href="https://markets.businessinsider.com/stocks/spce-stock">Virgin Galactic</a> tumbled as much as 6% on Friday after shareholders moved to sell up to 113 million shares.In a Securities and Exchange Commission <a href="https://www.sec.gov/Archives/edgar/data/1706946/000170694620000063/a424b3prospectus121420.htm">filing</a> published Thursday, stockholders announced efforts to resell up to about 105 million outstanding shares of common stock and up to 8 million shares of common stock issuable upon the exercise of warrants. <keyword id="130495" type="COMPANY" weightage="60" keywordseo="Virgin-galactic">Virgin Galactic</keyword> won't receive any of the proceeds from the sale. The filing doesn't specify when the selling could begin.The resale efforts come as Virgin Galactic shares sit about 120% higher year-to-date. Read more: <a href="https://www.businessinsider.com/5g-stocks-to-buy-invest-in-global-boom-etf-executives-2020-12">3 ETF executives break down the various ways to invest early in the global 5G boom as it grows to unlock $13.2 trillion in value by 2035</a>Shares recently weathered stronger volatility as the company prepares for its first manned test flight out of Spaceport America in New Mexico. The stock <a href="https://www.businessinsider.com/virgin-galactic-stock-price-first-manned-spaceport-test-flight-spce-2020-12">rallied to a 9-month high</a> on December 7 as investors bet on a successful test, but rocket engine issues postponed the flight and <a href="https://markets.businessinsider.com/news/stocks/virgin-galactic-stock-price-test-flight-abort-rocket-engine-ignite-2020-12-1029890130#:~:text=Virgin%20Galactic%20falls%2017%25%20after,rocket%20engine%20fails%20to%20ignite&amp;text=Shares%20of%20Virgin%20Galactic%20tumbled,to%20rocket%20engine%20ignition%20issues.ues.">dragged shares as much as 17% lower</a> on December 14."Virgin Galactic is now conducting post-flight analysis and can so far report that the onboard computer which monitors the propulsion system lost connection, triggering a fail-safe scenario that intentionally halted ignition of the rocket motor," the company said in a statement.It's unclear when the test flight will be rescheduled. The initial plans to hold the test in November were already delayed once after rising COVID-19 cases in New Mexico squandered launch efforts.Virgin Galactic closed at $25.50 on Thursday. The company has five "buy" ratings and four "hold" ratings from analysts, with a consensus price target of $24.56.Now read more <keyword id="31671" type="CITY" weightage="100" keywordseo="markets">markets</keyword> coverage from Markets Insider and Business Insider:<a href="https://markets.businessinsider.com/news/stocks/tesla-stock-sp500-inclusion-slightly-lift-valuation-pe-ratio-goldman-2020-12-1029904274">Tesla's upcoming S&amp;P 500 inclusion won't make the index as expensive as some expect, Goldman Sachs says</a><a href="https://markets.businessinsider.com/news/stocks/housing-market-mortgage-rates-15th-record-low-freddie-mac-economy-2020-12-1029903816">US mortgage rates tumble to 15th record low of the year as housing market rallies</a><a href="https://www.businessinsider.com/bond-market-investing-advice-avoiding-fixed-income-strategy-mistakes-leuthold-2020-12">A Wall Street investment chief says the bond market's smart money could be repeating an error that shortchanged investors after the 2008 crisis. He explains why history will repeat itself - and how his firm is taking advantage.</a><a href="https://markets.businessinsider.com/stocks/spce-stock"><div type="image" title="SPCE" height="1182" width="1428" msid="79800068" hostid="261"></div></a>

Virgin Galactic slides 6% as investors look to sell 113 million shares

<div class="KonaFilter image-container display-table"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/5dd6d833fd9db275907da128-2000/vssunityreachesspace.jpg" border="0" alt="Virgin Galactic" data-mce-source="Virgin Galactic" /></div></div></div><ul><li>Credit Suisse is recommending investors buy shares in the newly public space tourism company <a href="https://markets.businessinsider.com/stocks/spce-stock">Virgin Galactic</a>. </li><li>The firm's analysts initiated coverage of the company on Thursday with and "outperform" rating, citing its "near-term monopoly" in the commercial space industry. </li><li>Virgin Galactic entered the <a href="https://markets.businessinsider.com/news/stocks/space-tourism-company-virgin-galactic-will-go-public-on-monday-2019-10-1028628607">public markets</a> in late October through a merger with Social Capital Hedosophia, a venture capital firm run by Chamath Palihapitiya. </li><li><a href="https://markets.businessinsider.com/stocks/spce-stock">Watch Virgin Galactic trade live on Markets Insider</a>.</li></ul><hr />Investors should buy newly public <a href="https://markets.businessinsider.com/stocks/spce-stock">Virgin Galactic</a> because of its "near-term monopoly" in the budding space tourism industry, Credit Suisse analyst wrote in a note to clients on Thursday. "Our bullish view reflects the near-term monopoly SPCE offers in an industry (commercial space tourism) where public investment opportunities are scarce," the firm wrote. "We view this as a classic tech-driven high demand, low supply story with high barriers to entry."Credit Suisse initiated coverage of Virgin Galactic with an "outperform rating and $12.43 price target. That figure represents around a 39% premium from where shares traded on Thursday afternoon. The lack of current offerings for space tourism enables "sticky pricing," as well as the potential for price discrimination, the analysts found. That dynamic - in combination with low-operating costs thanks to the firm already having invested in the required infrastructure - creates strong economics for its business model. "With no near-term competition, growth should be fueled by expanding supply," the analysts wrote. The firm determined its price target for Virgin Galactic through a blended valuation including an equally-weighted enterprise multiple and discounted cash flow. The valuation also includes a 5% weighting for a potential catastrophic event such as a fatal crash, which was assigned a dollar-value of zero. According to the bank's forecast, Virgin Galactic could generate $278 million in EBITDA in 2024 on revenue of $576 million. "Losses should dissipate rapidly as flight activity rises. Per flight ticket revenue is around 3x variable mission cost, which would drive very attractive incremental margins," the analyst added. Credit Suisse is the second firm behind Vertical Research Partners to initiate coverage on Virgin Galactic. Vertical Research has a $20 price target and "buy" rating on the stock, according to Bloomberg data. Virgin Galactic became the first publicly-traded <a href="https://markets.businessinsider.com/news/stocks/space-tourism-company-virgin-galactic-will-go-public-on-monday-2019-10-1028628607">space tourism</a> company in late October by merging with Social Capital Hedosophia, a venture capital firm run by Chamath Palihapitiya. <div class="KonaFilter image-container display-table"><div><div class="image"><a href="https://markets.businessinsider.com/stocks/spce-stock"><img src="https://static-ssl.businessinsider.com/image/5dd6d8a4fd9db27541714a7c-733/screen shot 2019-11-21 at 13332 pm.png" border="0" alt="SPCE stock" data-mce-source="Markets Insider" /></a></div></div></div>

Credit Suisse says investors should buy Virgin Galactic because of its 'near-term monopoly' in commercial space tourism

<img src="https://static-ssl.businessinsider.com/image/5e2869db24306a7e511206cc-2400/2019-10-28t170049z1653561311rc1e0ac31710rtrmadp3virgin-galactic-ipo.jpg" alt="Virgin Galactic IPO Richard Branson" /><ul><li><a href="https://markets.businessinsider.com/stocks/spce-stock">Virgin Galactic</a> soared more than 14% Wednesday morning after <a href="https://markets.businessinsider.com/stocks/ms-stock">Morgan Stanley</a> said investor interest in the stock rivals that seen for Tesla.</li><li>The bank's analysts "are having more conversations" about Virgin Galactic than any other US stock they cover "with the possible exception of Tesla," according to a Wednesday note.</li><li>Morgan Stanley noted that the company's shares are approaching its $22 price target, but added that the stock "still has more than 250% upside potential" to the analysts' $60 bull-case target.</li><li><a href="https://markets.businessinsider.com/stocks/spce-stock">Watch Virgin Galactic trade live here</a>.</li></ul><hr />Richard Branson's <a href="https://markets.businessinsider.com/stocks/spce-stock">Virgin Galactic</a> spiked more than 14% in early Wednesday trading after <a href="https://markets.businessinsider.com/stocks/ms-stock">Morgan Stanley</a> analysts said the stock's investor interest in on par with Tesla.The company is already nearing the $22 price target set by Morgan Stanley in December, and is up 95% from its first day of trading in late October. Yet analyst Adam Jonas notes his $60 per share bull-case implies an additional 250% climb, and that a "significant increase" in investor interest can drive the stock higher in its first year of public trading.The investment bank has noticed "a materially greater frequency" of investors who "understand the pitch" and want to learn more about the company's position in the space-travel industry. The analysts "are having more conversations on SPCE" than any other US stock they cover "with the possible exception of Tesla," they wrote Wednesday.Tesla has been among the most talked-about stocks since its June 2010 initial public offering, as investors bet on whether the electric-car company could turn a profit and push into a new vehicle sector. It recently retook the crown <a href="https://markets.businessinsider.com/news/stocks/tesla-stock-most-shorted-us-beats-apple-highest-short-interest-2020-1-1028823046">as the most-shorted stock in the US</a>, yet the automaker soared to a record high Wednesday as improving sentiment on Wall Street and the opening of its Shanghai Gigafactory propped up share prices through January.Virgin Galactic's stock is already up about 65% year-to-date, massively outperforming the S&amp;P 500's 3% gain in the same period. The jump is even beating Tesla's 40% gain in 2020.Virgin Galactic's Wednesday run sets it up for an eighth consecutive record close.Virgin Galactic also stands to profit from investors' "greater appreciation" of hypersonic travel and the company's opportunity in the industry, Morgan Stanley said. The bank initiated coverage on Virgin Galactic shares on December 9, saying that the company's greater investment opportunity comes from an expansion into hypersonic travel. The rapid point-to-point service could drive as much as $800 billion in annual sales by 2040, according to Morgan Stanley.The analysts maintain an "overweight" rating on the company's stock, along with their $22 price target.Virgin Galactic traded at $18.89 per share as of 1:15 p.m. ET Wednesday.The company has a consensus price target of $19 from the three analysts covering the stock, according to Bloomberg data.Now read more markets coverage from Markets Insider and Business Insider:<a href="https://markets.businessinsider.com/news/stocks/us-housing-market-strength-existing-home-sales-two-year-high-2020-1-1028836790">Existing-home sales in the US soar to best pace in nearly 2 years</a><a href="https://markets.businessinsider.com/news/stocks/bubble-financial-markets-sovereign-debt-jpmorgan-jamie-dimon-davos-interest-2020-1-1028836398">Jamie Dimon says financial markets' only bubble is in sovereign debt</a><a href="https://www.businessinsider.com/top-brands-in-influencer-marketing-list-youtube-instagram-tiktok-2020-1">The top 17 brands in influencer marketing that are innovating and pushing the industry forward</a><img src="https://static-ssl.businessinsider.com/image/5e288f4a62fa812f2476210d-731/screen shot 2020-01-22 at 10655 pm.png" alt="SPCE" /><a href="https://www.businessinsider.com/intelligence/future-of-retail?IR=T&amp;itm_source=businessinsider&amp;itm_medium=ctgr_bii&amp;itm_term=ctgr_leadgen&amp;itm_content=tesla&amp;itm_campaign=future-of-retail-2"><img src="https://static.businessinsider.com/image/5dcb11a63afd37083c1cbb6b" alt="Exclusive FREE Slide Deck: Future of Retail: Delivery &amp; Fulfillment by Business Insider Intelligence" style="width: 100% !important" /></a>

Virgin Galactic rockets higher after Morgan Stanley says interest in the stock matches Tesla

<ul class="summary-list"><li>A Special Purpose Acquisition Company (<keyword id="1817616" type="ORGANIZATION" weightage="60" keywordseo="SPAC">SPAC</keyword>) is a company created solely to merge or acquire another business and take it public — a cheaper, faster alternative to an initial public offering (<keyword id="6354763" type="UNKNOWN" weightage="60" keywordseo="ipo">IPO</keyword>).</li><li>Investors essentially write blank checks to SPACs, which can take up to two years to target and buy another firm.</li><li>SPACs offer individual investors the chance to get in on the ground floor of a potentially big stock, but are also highly risky.</li></ul><ul class="read-more-links"><li>A lot of individuals would love to get in early on an initial public offering (IPO) — a company's launch on the stock exchange — before the shares start jumping on fever-pitch demand. But pension funds and professionals usually get there first, leaving "retail investors," as Wall Street calls them, typically picking up the post-offering breadcrumbs — and often paying a higher price.But a back-door, formerly out-of-favor IPO approach known as a SPAC has recently roared back in popularity among entrepreneurs and venture capitalists. It may offer a new opportunity for small investors to get in on the action at the beginning.<h2>What is a SPAC?</h2>SPAC is an acronym for a Special Purpose Acquisition Company, basically a publicly traded firm that has no operations, no assets — other than a war chest of cash — and just one stated business plan: to eventually buy another company.A SPAC is generally formed by a group of investors, called sponsors, with a strong background in a particular industry or business sector. They raise funds from other investors, and use the money to acquire an existing, privately held company — and then take it public in an IPO.When they launch the SPAC, the sponsors generally either don't have a specific target in mind, or they're not ready to name it in order to avoid the extensive paperwork and disclosures required by the Securities and Exchange Commission (SEC).The early-bird underwriters and institutional investors, and the individual investors who generally come in later, typically have no idea exactly how the sponsors will spend the money. So early investors are basically relying on the sponsors' reputation in the hope of snagging a good investment.But they've got to be prepared to wait. Even after a SPAC goes public, it can take up to two years to pick and announce the target company it wants to acquire, or technically speaking, merge with (the corporate charter specifies the exact time frame, per SEC regulations). If it doesn't, the SPAC is liquidated, and funds it's raised are supposed to be returned to investors.All this uncertainty is one reason why most SPACs trade at only $10 a share. Of course, the assumption is that when, and if, they acquire a company and take it public, the share prices will soar. At this point, investors can cash out, or hold on for longer-term gains.<h2>How SPACs work </h2>If the SPAC set-up sounds like a situation ripe for abuse — it once was. Back in the 1980s, a lot of fraud surrounded these blank check companies, as they were then known. Many were purely shell companies, offering thinly traded<a href="https://www.businessinsider.com/what-are-penny-stocks" target="_blank" rel="noopener"> penny stocks</a> or "pink sheets." Often these firms either absconded with investors' cash or engaged in overvalued insider deals that left many investors with a bagful of nothing.Since then, however, the metamorphosis from blank check company to SPAC has involved more than just a name change. The SEC has tightened regulations and procedures for these ventures.Now, for example, a SPAC generally has to place the investor money in a trust or escrow account to keep it secure until the target company is publicly announced. At that point, if investors don't like the looks of the deal, they should be able to recover their funds.SPACs also have to register with the SEC, even if they're relatively small (which in the IPO universe means assets under $1 million).</li></ul><iframe title="SPACs are soaring in numbers and size" id="datawrapper-chart-SDcem" src="https://datawrapper.dwcdn.net/SDcem/4/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% ; border: none;" height="630"></iframe><h2>SPAC Pros and Cons</h2>Like any investment, SPACs have advantages and disadvantages.<h3>Advantages of SPACs</h3><ul><li>They're cheap. Many SPACs are priced at $10 a share, well within reach of retail investors. And they stay low for a while. "SPAC IPOs on average don't jump on the first day of trading," notes Jay R. Ritter, the Joseph B. Cordell Eminent Scholar Chair at the University of Florida's Warrington College of Business, who researches IPOs. "The average increase this year on the first day of trading has been 1.7%, so buying in the market might mean paying $10.17 or so."</li><li>They invest in hot areas. The new breed of SPACs focuses on sexy sectors in the tech or consumer fields. Promising startups like <a href="https://www.businessinsider.com/chamath-palihapitiya-spac-buys-opendoor-quiet-period-2020-9" target="_blank" rel="noopener">Opendoor</a>, <a href="https://www.businessinsider.com/clover-health-spac-plans-and-growth-projections-for-medicare-2020-10" target="_blank" rel="noopener">Clover Health</a>, and electric automaker Nikola are among the firms that have gone public via SPACs.</li><li>They're open to individual investors. Even though institutional investors usually go to the front of the line for SPAC offerings, the high number of shares sold makes it easier for smaller investors to get a piece of the action. </li></ul><h3>Disadvantages of SPACs</h3><ul><li>Blind investment. SPAC investors usually don't know how their money will be used — what the SPAC's target company is (often the sponsors don't know either). So the deal's impossible to evaluate.</li><li>Lag time. There can be a long lag between the time investors pump money into a SPAC and when it actually buys up a company and starts operations. Your money may sit for up to two years in an escrow account. If no acquisition happens, your funds are returned, but idling capital for that long may be painful.</li><li>Mixed track record. In a July 2020 report, Goldman Sachs analyzed the performance of 56 SPACs — primarily in the technology, industrials, energy, and financial segments, — that "merged" with their target companies beginning in January 2018. "During the one-month and three-month periods following the acquisition announcement, the average SPAC outperformed the S&amp;P 500 by 1 percentage point (pp) and 11 pp, respectively, and beat the Russell 2000 by 6 pp and 15 pp, respectively," the report notes. "However, the average SPAC underperformed both indexes during the 3, 6, and 12-months after the merger completion."</li></ul>Of course, some SPACs do better than that. For example, <keyword id="130495" type="COMPANY" weightage="60" keywordseo="Virgin-galactic">Virgin Galactic</keyword> Holdings (<a href="https://markets.businessinsider.com/stocks/spce-stock" target="_blank" rel="noopener">SPCE</a>) — a particularly high-profile offering — has appreciated 146% in the year since it went public via a SPAC in October 2019. <h2>Why SPACS are becoming popular</h2>SPACs embarked on their newly respectable road in the mid-2010s. Big-name entrepreneurs, hedge-fund managers, and celebrities like Richard Branson, Bill Ackerman, and Michael Jordan became involved in them, as did mutual fund companies like Fidelity and T. Rowe Price, and investment banks like Morgan Stanley, Credit Suisse, and Goldman Sachs.Their numbers swelled in 2020. As of early October 2020, SPACs have launched 128 IPOs, raising a total of $49.1 billion, according to SPAC Research, which gathers data on SPACs. That's up from 2019 when just 59 SPACs raised a total of $13.6 billion.Certainly, the COVID-19 pandemic has been a factor. SPACs tend to<a href="https://www.businessinsider.com/spac-blank-check-companies-explained-2020-5" target="_blank" rel="noopener"> fare better in periods of stock market decline</a> because of the way they work. Also, compared to a traditional IPO, SPACs offer certain advantages to sponsor-organizers and to the companies who want to go public. One is the streamlined disclosure requirements that save time, money, and trees.SPAC IPOs are further turbocharged because there are fewer people involved. A traditional IPO involves "multiple investors negotiating with issuers and underwriters simultaneously, about specific terms like the offering price, executive compensation, underwriter rights, and multiple other issues," says Tyler Gellasch, executive director of Healthy <keyword id="31671" type="CITY" weightage="100" keywordseo="markets">Markets</keyword> Association, a nonprofit, investor educational coalition. "But in a SPAC, it's often just the sponsor and the target company at the table."So deals can move faster.<h2>How to invest in SPACS</h2>Getting into a SPAC is not as simple as buying regular equities: Hedge funds, mutual funds, and other deep-pocketed institutional investors typically find out about a new SPAC first. "It helps if a would-be investor has an existing relationship with a SPAC sponsor," says Tyler Gellasch. But if Michael Jordan isn't among your contacts, there are other ways to break into the world of SPACs:<ul><li>Your friendly stockbroker or wealth manager. Ask them to keep an eye out for offerings</li><li> The websites of IPO-oriented investment banks. One SPAC specialist, <a href="https://www.earlybirdcapital.com/" target="_blank" rel="noopener">Early Bird Capital</a>, lists companies that are actively seeking targets.</li><li> The NASDAQ website also lists upcoming IPOs, including SPACs, which can be identified by a ticker symbol that generally ends with a "U."</li><li> Industry associations like SPAC Research sometimes highlight S-1 filings, which give formal notice of a SPAC's intention to go public. </li></ul><h2>The financial takeaway</h2>A SPAC is definitely not "a 'widows and orphans' investment," according to Gellasch. "For one thing, you may be tying up your money for a year or more without knowing what the ultimate investment will be. The sponsor and institutional investors may know — at least generally — what they're looking to do with the funds, but the small investor will likely be in the dark.""Until a deal is announced, the investor is just hoping that a good merger will happen," Ritter adds. And of course, there are no guarantees as to returns after it does. SPACs are speculative animals. They tend to acquire growth companies — start-ups and fledgling firms — which, by their nature, are higher-risk than, say, established <a href="https://www.businessinsider.com/what-are-blue-chip-stocks" target="_blank" rel="noopener">blue-chip</a> companies.Still, SPACs offer smaller investors a way to get into the IPO game — if not up in front with the big players, at least not too far behind them.<h2>Related Coverage in <a href="https://www.businessinsider.com/investing-reference" target="_blank" rel="noopener">Investing</a>:</h2><ul class="read-more-links"><li><h3><a href="https://www.businessinsider.com/top-spac-underwriters-law-firms-investors-blank-check-volume-fees-2020-9" target="_blank" rel="noopener">Meet 16 bankers, lawyers, and capital providers helping engineer a $40 billion blank-check craze that's fast-tracking companies to public markets</a></h3></li><li><h3><a href="https://markets.businessinsider.com/news/stocks/ipos-top-largest-initial-public-offerings-all-time-ranked-cash-2020-7-1029373999" target="_blank" rel="noopener">Here are the 11 largest IPOs of all time</a></h3></li><li><h3><a href="https://markets.businessinsider.com/news/stocks/spac-etf-first-blank-check-begins-trading-stock-market-nyse-2020-10-1029640817" target="_blank" rel="noopener">First blank-check ETF begins trading as SPAC euphoria continues</a></h3></li><li><h3><a href="https://www.businessinsider.com/biggest-companies-to-go-public-through-a-spac-2020-10" target="_blank" rel="noopener">Going public through a SPAC isn't just for the unsexy startups anymore. Here are the 10 biggest deals in the blank-check craze in the last 5 years.</a></h3></li><li><h3><a href="https://www.businessinsider.com/top-spac-bankers-lawyers-cantor-credit-suisse-goldman-citi-fidelity-2020-10" target="_blank" rel="noopener">The top bankers, lawyers, and capital providers driving a $50 billion SPAC boom</a></h3></li></ul>

You Searched For "spce price target" and got 9 results

Virgin Galactic soars after FAA says company can resume flights following mishap probe

Isabelle Lee

Virgin Galactic could climb 33% as demand for commercial space travel accelerates, says Jefferies

Carla Mozée

Virgin Galactic stock-price target slashed 39% by Bank of America as analysts expect delays in commercial space flight timeline

Emily Graffeo

UBS downgrades Virgin Galactic as the bank says nearly 200% rally leaves no upside left for the stock

Emily Graffeo

Virgin Galactic slips after the FAA says the company is grounded pending an investigation into a mishap during Branson's trip to space

Isabelle Lee

Virgin Galactic slides 6% as investors look to sell 113 million shares

Ben Winck

Credit Suisse says investors should buy Virgin Galactic because of its 'near-term monopoly' in commercial space tourism

Daniel Strauss

Virgin Galactic rockets higher after Morgan Stanley says interest in the stock matches Tesla

Ben Winck

A SPAC is a high-risk but potentially profitable way to get in on the ground floor of a new stock — here's everything investors need to know

Martin Daks