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· Posted on
February 21, 2024

Virgin Galactic's share price gets throttled back to earth after raising nearly $700 million in debt

Virgin Galactic's whole mission is to eventually take passengers on trips to space.

What's the key learning?

  • Virgin Galactic are issuing $700 million worth of debt in the form of convertible senior notes to speed up the development of its spacecraft fleet
  • But...they're nearly two years past their commercial deadline. So, the news saw shares sink more than 16%
  • A convertible note is a type of debt used by start-ups and high growth companies looking to raise cash from investors.

Background: Virgin Galactic are one of Richard Branson's (aka the founder of Virgin Airlines) creations. Their whole mission is to eventually take passengers on trips to space.

What happened: Now, the company is issuing $700 million worth of debt in the form of convertible senior notes. The plan is to use this debt to accelerate the development of its spacecraft fleet.

What else: This is a bit of a 🚩🚩🚩🚩because it's already nearly two years past its commercial deadline. So, the news saw shares sink more than 16% at one point.

So what's the key learning?

💡A convertible note is a type of debt used by start-ups and high growth companies looking to raise cash from investors. This debt is unique because it turns into equity at a later point.

💡For early stage companies, it can be hard to determine their true value because there aren't data points around revenue, profit and long-term growth rates.

💡This 'conversion' happens when more information becomes available to establish a proper valuation of the company.

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