Virgin Galactic Announces 1-for-20 Reverse Stock Split to Avoid NYSE Delisting

Virgin Galactic has approved a 1-for-20 reverse stock split, a strategic move aimed at boosting the company’s stock price and preventing delisting from the New York Stock Exchange (NYSE). The decision was announced after markets closed on June 12, and the reverse split will take effect after markets close on June 14.

Under this plan, every 20 current shares of Virgin Galactic stock will be consolidated into one new share. This measure was at the high end of a proposal put forward to shareholders in April, where options ranged from a 1-for-2 to a 1-for-20 split. Shareholders approved the reverse split plan during the company’s annual meeting on June 12.

The reverse split is designed to significantly increase the share price at a critical time. Virgin Galactic’s stock had dipped below the minimum levels required by the NYSE, endangering its listing status.

“The primary goal of the reverse stock split is to increase the per share market price of the company’s common stock to meet the minimum per share bid price requirement for continued listing on the NYSE,”- Virgin Galactic

At the end of June 14th, Virgin Galactic shares closed at $0.68, having traded below the NYSE’s minimum share price of $1 for much of the preceding two months. The company disclosed on May 29 that it had received a notice from the NYSE indicating its average closing share price had been below $1 for 30 consecutive trading days. This notice gave Virgin Galactic six months to raise the share price or face delisting.

Virgin Galactic’s share price has been on a downward trajectory since reaching peaks in 2021 when shares traded at over $50 on two occasions. The declining share price led the company to phase out operations of its suborbital spaceplane, VSS Unity, and lay off staff last November to conserve cash. This strategic pivot focused on the development of new Delta-class spaceplanes, which promise lower operational costs and higher flight rates.

At a June 5th conference, Michael Colglazier, CEO of Virgin Galactic, reaffirmed the company’s commitment to this plan. He highlighted that Virgin Galactic had approximately $870 million in cash and equivalents at the end of the first quarter.

“That amount of money, we’ve said, is sufficient to move through and build our first two Delta ships and put them into commercial service...And just those first two ships in service, we estimate, drives about a $450 million revenue business at great contribution margin and flow through, and that puts the company on a cash positive footing.” - Michael Colglazier, CEO of Virgin Galactic

Despite these assurances, Virgin Galactic’s shares were down more than 12% by midday on June 13 and continued to fall until end of day on the 14th when the reverse split would go into effect.