(The Motley Fool) – What happened
Shares of Virgin Galactic (NYSE:SPCE) began rising in midmorning trading Tuesday. As of 1:45 p.m. EDT, they are now up 5%. With no news concerning Virgin Galactic in evidence, however, it appears that investors may be reacting to news about a different Virgin space company.
Specifically, that company is Virgin Orbit — Virgin Galactic’s satellite-launching sister company, which The Wall Street Journal reported over the weekend is seeking to raise $200 million in a private stock offering that will value the company at roughly $1 billion.
So what does Virgin Orbit have to do with Virgin Galactic? Not a whole lot, at first glance. I mean, both companies aim to reach space in a two-step process, beginning by attaching a rocket to a carrier aircraft and flying high into the atmosphere where the aircraft will release the rocket to blast off into space. Afterwards, however, Virgin Galactic rockets (carrying human passengers) will return to Earth. But Virgin Orbit rockets (carrying satellites) will deliver their cargo to orbit and then burn up in the atmosphere.
The two companies share a parent company — Sir Richard Branson’s Virgin Group Ltd. — but are otherwise independent of one another.
And yet, it’s that parent-subsidiary relationship that could be key to why Virgin Galactic stock is rising on Virgin Orbit’s news.
Earlier this year, if you recall, Branson had to sell a sizable portion of his Virgin Galactic shares in order to raise cash to keep the rest of his Virgin empire — the Virgin Atlantic airline in particular — solvent through the recession. So clearly, the fates of the various Virgin companies are at least partly intertwined. It follows, then, that when Virgin Orbit raises additional cash, this might lessen the financial strain on the Virgin empire as a whole. It could decrease the pressure upon Branson to sell Virgin Galactic shares (depressing the share price for all shareholders) to subsidize losses among subsidiaries elsewhere, and…
It could actually be good news for Virgin Galactic stock after all.