WASHINGTON — Virgin Galactic has approved a reverse stock split intended to boost the company’s stock price and avoid delisting.
The company announced after markets closed June 12 that the company’s board approved a 1-for-20 reverse stock split, which will take effect after markets close June 14. Under the plan, 20 current shares of Virgin Galactic stock will be converted into 1 new share.
The 1-for-20 reverse split is at the high end of the proposal that the company put forward to shareholders in April. At the time, the company said it was considering options between a 1-for-2 and a 1-for-20 split, with the exact value to be determined by the board if shareholders approved the plan at its annual meeting June 12.
The reverse split effectively increases the share price by a factor of 20 at a time when the share price had dipped below minimum levels set by the New York Stock Exchange (NYSE). “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,” the company noted in a statement.
Shares in Virgin Galactic closed June 12 at $0.85, and had been trading below the exchange’s minimum share price of $1 for much of the last two months. The company reported May 29 it has received a notice from the NYSE that its average closing share price had been below $1 for 30 consecutive trading days. That notice gave the company six months to raise the share price or be delisted from the exchange.
The company’s share price has been declining since peaks in 2021 where, on two occasions, Virgin Galactic shares traded at more than $50. The falling share price was one factor in the company’s decision last November to phase out operations of its existing suborbital spaceplane, VSS Unity, and lay off some staff in order to conserve its cash on hand, focusing on development of the new Delta-class spaceplanes that offer lower costs and higher flight rates.
At a June 5 conference by TD Cowen, Michael Colglazier, chief executive of Virgin Galactic, said the company was sticking to that plan. He noted the company had about $870 million of cash and equivalents in hand as of 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,” he said. “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.”
Shares in Virgin Galactic were down more than 12% midday June 13.