Virgin Galactic Plunges 19% After Raising $500M in Convertible Debt


This article was originally published on TipRanks.com

Shares of Virgin Galactic Holdings, Inc. (NYSE: SPCE) tumbled to an almost two-year low on Thursday closing 18.9% lower at $10.03. The drop followed the announcement of the proposed pricing of the American spaceflight company’s $500 million convertible notes offering.

The company has priced its $425 million 2.50% convertible senior notes due 2027. Settlement of the issuance and sale of the notes is scheduled for January 19, 2022.

“The initial purchasers have also been offered an option to purchase, for settlement within a period of 13 days from, and including, the date notes are first issued, up to an additional $75 million principal amount of notes,” the company said.

Details of the Offering

The offering, with a maturity date of February 1, 2027, has an interest rate of 2.5% per annum, which will be paid semi-annually in arrears on February 1 and August 1 of each year, commencing on August 1, 2022.

The notes can be converted on or after November 1, 2026, until the close of business on the second scheduled trading day immediately preceding February 1, 2027. Noteholders will only have the option to convert the notes before November 1, 2026, under certain circumstances.

The initial conversion rate will be 78.1968 shares of Virgin Galactic’s common stock per $1,000 principal amount of notes. The conversion settlement may be made in cash, shares of Virgin Galactic’s common stock, or a combination of cash and stock.

The net proceeds from the offering are expected to be about $413.7 million (around $486.8 million on full exercise of the option to purchase additional notes by the initial purchasers), including related expenses. Virgin Galactic plans to use $52.3 million to fund the cost of entering into capped call transactions. The remaining amount will be used to fund working capital, general and administrative costs, and capital expenditures. This, in turn, will enhance the development of the company’s spacecraft fleet to allow for high-volume commercial service.

The privately negotiated capped call transactions with certain financial institutions cover the number of shares of Virgin Galactic’s common stock underlying the notes at an initial cap price of $20.06 per share.

Wall Street’s Take

Recently, Jefferies analyst Greg Konrad maintained a Buy rating on the stock but reduced the price target to $30 (199.1% upside potential) from $33.

Overall, the stock has a Hold consensus rating based on 5 Buys, 2 Holds, and 3 Sells. The average Virgin Galactic price target of $29.20 implies 191.13% upside potential. Shares have lost 67% over the past year.

Website Traffic

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (NYSE: SEMR), the world’s biggest website usage monitoring service, offers insight into Virgin Galactic’s performance this quarter.

According to the tool, the Virgin Galactic website recorded a 71.62% decrease in global visits in December compared to the same period last year. Also, a quarter-to-date comparison showed a fall of 48.05% compared to Q4 2020, while year-to-date website traffic growth stands at 100.67%.

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